CBC Business news round-up by Mark Gollom – summer gas prices forecast to remain stable

Western Canada facing gas shortages, oil supply cut from wildfires

By Mark Gollom, CBC News Posted: Jun 04, 2016 5:00 AM ET Last Updated: Jun 04, 2016 11:50 AM ET

tourism-gas-dollar-20150111Canadian motorists shouldn’t expect increases at the pumps as summer gas prices are expected to remain stable. (Canadian Press)

Mark Gollom is a Toronto-based reporter with CBC News. He covers a wide range of topics, including Canadian and U.S. politics.

From gas shortages in Western Canada to a dramatic spike in costs of gasoline in Newfoundland and Labrador, Canadian motorists may be concerned that these are signs that price increases will surely hit the pumps this summer.

But some industry analysts are forecasting no major spikes for the balance of the summer driving season.

“My prognosis is we’ve probably seen as much of a price increase at this point that we will see in the summer,” said industry analyst Michael J. Ervin of Kent Group Ltd.

“There’s always those outlier things. If there was a substantial increase in crude prices, that could have an impact but we don’t think that we’re going to see any upward volatility of crude prices in the near future.”

Roger McKnight, a chief petroleum analyst with En-Pro International Inc., said that in 12 of the last 13 years, gas prices hit their peak around mid-April.

out of gas signA sign at a Petro-Canada station on B.C.’s Highway 97 warns customers that they are out of fuel. (Brady Strachan/CBC)

In the run-up to the summer driving season, which starts with the Memorial Day weekend in the U.S., prices generally start to fall back because refineries are geared up and ready for the summer driving season.

And that pattern seems to be repeating itself this year as well, he said.

“Enjoy it while you can,” said McKnight. “The prices will remain stable if not fall noticeably between now and Labour Day.

“The U.S is keeping pace with demand very well indeed,” he said. “The only thing that could upset the apple cart is refinery outage or a pipeline outage, which is very hard to predict.”

Volatility in the system

That’s not to say that there isn’t volatility in the system, says Dan McTeague, senior petroleum analyst for gasbuddy.com.

In the U.S. Midwest, two major refineries, one in Ohio, the other in Michigan, are short of supply, which could affect Ontario, he said

Meanwhile, in Western Canada, the Fort McMurray wildfires resulted in the cut of oil production by a million barrels a day at one point. And a unit outage at Suncor’s Edmonton refinery has led to a number of gas stations going empty in Alberta, Saskatchewan, Manitoba and the northern Interior of B.C.

Gas station closed signA Petro-Canada gas station in Kelowna, B.C., has roped off its gas pumps. An employee at the station said they ran out of gas on Thursday evening. (Brady Strachan/CBC)

That means with high U.S. demand and ongoing troubles in Western Canada in terms of getting crude to market, to refineries and into the West Coast, “we’re in for some turbulent weeks ahead,” McTeague said.

“The market is drum-tight right now. There isn’t anybody else out there in the U.S. or Canada … to sell spare barrels to Suncor,” said McTeague. “Suncor right now is saying they’re putting all their stations on what’s called allocation [because they] don’t have enough gas to get around.”

The expectation is that as things get back to normal in Fort McMurray, so, too, will production rates, said McTeague.

“But there’s still that period of uncertainty that we’re going through and it’s going to take some time to work its way through.”

In the meantime, he said, there will be upward pressure on gas prices pretty much everywhere in Western Canada.

Yet so far, said Ervin, that pressure hasn’t materialized into higher gas prices for the region. According to his company’s survey this week, and factoring out the tax differences, pump prices in markets like Edmonton and Calgary were a cent or two less than the Canadian average.

Wildfires didn’t cause price increases

“It really shows that the wildfires, although devastating for the Fort McMurray area, haven’t led to any sort of price increases.”

As for the sudden 18.5 cent gas hike in Newfoundland and Labrador, that has nothing to do with the industry, but is the result of a tax increase implemented by the provincial government to make up for lost revenues and a ballooning deficit.

With record levels of oil inventory and the price now hovering around $50 a barrel, McTeague said he didn’t expect crude to have any effect on the price of gasoline.

“Refinery supply and demand has more to do wth gas prices than price of oil,” he said.