London drivers will be hit with a seven-cents-a-litre spike in gasoline prices Thursday as the toll of Russia’s Ukraine invasion trickles down to pumps here, a national energy analyst says.
London drivers will be hit with a seven cents a liter spike in gasoline prices Thursday as the toll of Russia’s Ukraine invasion trickles down to pumps here, a national energy analyst says.
The hike comes after a two cent a liter jump Wednesday and as more price increases loom this spring, including a four cent a liter rise forecast for Friday, said Dan McTeague, president of Canadians for Affordable Energy that runs the website gaswizard.ca.
That means London gas prices are forecast to rise 13 cents a liter in one week.
“It is tough, everything is going up,” said a frustrated Halit Fazliji as he filled up his family sedan at a Petro Canada station on Southdale Road.
“It is tough for a working person today to keep food on the table. I have to go to work every day and all these increases are making it hard.”
The year-over-year inflation rate topped five per cent in January, led largely by food and gas price rises, and Fazliji’s feeling it, he said. “Over the long term, it hurts.”
Russia supplies about 10 per cent of the world’s oil, about 10 million barrels a day, and that supply is now cut off due to economic sanctions over its invasion of Ukraine.
Canada does not import Russian oil, but the shortage has increased global gas prices, McTeague said.
“We pay global gas prices and whatever impacts the global supply, whether it is food or lumber or gas, is felt here,” he said. “It has taken 10 per cent supply away from what was already a tight market. There is now a supply shortage.”
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The price of regular gasoline in London, about $1.59.9 a liter Wednesday, was forecast to hit $1.66.9 after midnight, he said. Premium gas in London will cost $1.91.9 and diesel $1.69.9 a liter Thursday.
In early January, local gas prices averaged about $1.40 a litre, rose steadily and hit $1.50 last month. and could reach $1.75 in April, McTeague said.
“Drivers will have to embrace higher prices. We are saying. ‘Get ready, this is coming,’” said Vijay Muralidharan, director of consulting at Kalibrate, a Calgary energy consulting firm.
He agrees the rise is due largely to the war in Ukraine that has created uncertainty in the energy sector as the delicate balance of production supplying demand has been disrupted.
“Uncertainty with crude creates a panic,” he said. “This freaks people out.”
Muralidharan believes the conflict may add 10 to 15 cents a liter to gas prices. Four things most directly affect gas prices: crude production costs, refining margins, retail margins and taxes – and all are difficult to reduce.
“You can’t tell people not to consume. There is no easy solution, it is very complicated,” he said.
On April 1, Canadians will see a roughly two-cent increase in federal tax on a liter of gas, part of the so-called carbon tax, and if Ottawa canceled that, it might ease the sting, Muralidharan said.
“You cannot even go out anymore, it is crazy. I might as well just stay home,” added Dulce Huezo, as she filled her car at the station.
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In addition to the Ukraine conflict, McTeague cited the move toward green energy policies that has restricted oil production. He pointed specifically to cancellation of energy pipeline construction in recent years.
“Green policies have stifled gas production,” he said.
“We live in a world where demand for fossil fuels is increasing, but people are saying we should make do with less. We cannot shut down gas plants and switch to windmill and solar power. So the world is hanging by a thread and then Putin causes a war.”
The Keystone XL pipeline was blocked by the US government and several smaller pipeline projects have been canceled in Canada.
There are, however, about 70 pipelines that cross the Canada-US border – 31 carrying oil and 39 natural gas – totaling about 840,000 kilometers in length, according to Natural Resources Canada.
And two other major pipelines, Trans Mountain and Coastal GasLink, are under construction in Western Canada, but the energy industry has been calling for more pipelines to be built in Canada.
Canada produces about 4.5 million barrels of oil a day, exports about 3.8 million a day to the US, and has capacity to double that production, McTeague said.
The US consumes more than 20 million barrels of oil a day, and imports about eight million barrels.