WINNIPEG, April 2 (MarketsFarm) – Higher diesel prices are on the horizon for Canada and the United States in 2019.
GasBuddy.com Senior Petroleum Analyst Dan McTeague pointed to an increase in overall demand, combined with a slowdown in heavy oil production, the federal carbon tax, and the coming IMO 2020 regulations. The latter being the International Marine Organization’s reductions in sulfur content in all marine fuels from 3.5 per cent to 0.5 per cent by January 1, 2020.
“It’s the perfect trifecta of bad news,” McTeague said. “While (people) may be upset with the gas price increase…they will be even more upset with the increase on diesel, which affects the price of everything.”
The analyst suggested people also keep a watchful eye on the value of the Canadian dollar to the United States dollar. He said there has been some speculation that the loonie could plummet to 62 U.S. cents during the course of 2019.
“If that’s the case, look for another 13-cent increase,” McTeague said of diesel prices.
Phil Flynn of the Price Futures Group in Chicago said the lack of heavy oil has been taking its toll. Diesel prices in the U.S. are at their highest average so far in 2019 at US$3.08 per gallon, according to the U.S. Energy Information Administration. Flynn suggested an increase to US$3.20 per gallon is possible.
“With farmers about to start planting, that will increase demand,” he said.
A big part of the problem has been oil production cuts by the Organization of Petroleum Exporting Countries (OPEC) led by Saudi Arabia, Flynn said.
Added to that has been the U.S. embargo on imports of Venezuela’s heavy crude that used to fed refineries on the Gulf Coast. Then there is the inability to ship a sufficient amount of heavy crude from Canada, as the Keystone XL pipeline remains incomplete.
“If that were built, we would be getting a lot more of that heavy Canadian crude,” he noted.