High prices at the pump tied to pandemic optimism
'It's all sort of a fairy tale right now,' says petroleum analyst
Prices at the pump are jumping lately in southern Alberta, and across the country, and they're likely to stay high according to one petroleum analyst.
The price of regular gasoline in Calgary is averaging about $1.18 a litre right now.
"It's pretty well across the country," said Roger McKnight, chief petroleum analyst at En-Pro International in Oshawa, Ont.
He explains the price leap is due to higher crude oil prices.
These high prices are tied to optimistic speculation in the industry based on several factors tied to the pandemic.
"A lot of the factors that go into the price of gasoline in Alberta and across the country is really speculation that the cost of crude [will] actually [go] even higher than it is today, just based on optimism that the the pandemic is coming to an end, that the vaccines are going to work," said McKnight.
"If that happens, the speculators are saying, well, that means demand will go up. So, gasoline prices have to go up accordingly."
He says that the price of crude has jumped about 50 per cent since the start of the year and 66 per cent since November last year.
Crude prices surged in early March after OPEC and its allies agreed to extend most oil output cuts into April. The organization decided that demand recovery from the coronavirus pandemic was still fragile despite a recent oil price rally.
Other speculation McKnight says has led to an increase in crude prices is the belief that as vaccines are administered, more of the workforce will return to the office, and use motor vehicles to do so.
"It's all sort of a fairy tale right now," he said. "It's based on optimism."
McKnight believes the only thing preventing prices from rising more at Canadian pumps is the value of the Canadian dollar.
"The higher the price of crude goes up, the higher the value of the loonie...that's a good thing for the consumers," he said.
The Canadian loonie is currently worth $0.797 US according to BNN Bloomberg.
With files from Rick Donkers, Tony Seskus and Reuters.