Enjoy lower diesel price while it lasts: analyst

Reading Time: 2 minutes

Published: August 13, 2015

It’s been a long wait for farmers and other buyers, but diesel prices are finally lower than gasoline in Western Canada.

The bargains might not last long.

Using Red Deer as an example, diesel was selling for 97.2 cents per litre at the pump in the first week of August compared to $1.05 for gasoline, according to MJ Ervin & Associates, which conducts a weekly survey of fuel prices in about 60 Canadian cities.

Across most of Canada, diesel sold at a premium to gasoline from September 2013 to June of 2015. At times, particularly in winter, diesel was 20 to 25 cents per litre higher than gasoline.

Read Also

Last used Sept 15, 2022
The American pea harvest is estimated to be 747,210 tonnes this year, a far cry from the 387,780 tonnes produced during last year’s drought. SKL

Last used Oct 14, 2021. An Israeli company hopes its new high-protein yellow pea variety can be registered next year and commercialized for 2023.  SKL

Yellow peas varieties have several newer options than the ones that producers are regularly growing.  |  File photo

Global pulse consumption to grow

Global per capita pulse consumption is expected to rise 23 per cent by 2034.

The unusually cold winter in 2013-14 drove up heating oil demand, pushing diesel prices higher in the eastern United States.

But diesel prices didn’t fall when the winter ended. They stayed higher than gasoline during the summer of 2014.

Spencer Knipping, an Ontario energy ministry petroleum analyst, said the shale oil exploration boom in North Dakota and other parts of the U.S. contributed to higher diesel demand and prices. The petroleum industry relies heavily on diesel fuel and demand peaks when exploration increases.

As well, the economy was relatively robust at that time. When the economy is strong, more trucks are on the road hauling goods, driving up diesel demand.

John Kiemele, vice president, chief operating officer and senior analyst with En-Pro International, an information and risk management service for energy commodities, said diesel prices won’t stay below gasoline for long.

Gasoline prices rise in summer because North Americans drive more from June to September. Gasoline is relatively high now because petroleum companies are making profits from refined products.

“The suppliers that have (crude) production as well as refineries, they’re not making anything on the production right now so they’ve increased the refining margins significantly,” Kiemele said from his office in Oshawa, Ont.

In the fall, refineries switch some production to diesel to ramp up for the heating oil season. Once that happens, companies will increase refining margins on diesel to generate profits, Kiemele said.

“If the price of crude stays as low as it is, you’ll see the refining margins on diesel jump… and gasoline should start to taper off because there won’t be demand for it,” he said. “So I think you’re going to see the two prices switch, where diesel will be much higher than the price of gasoline come the fall.”

Kiemele said the weak loonie is also driving up prices at the pump in Canada.

With crude oil below $50 a barrel, most Canadians would conclude that gasoline and diesel prices should be lower.

Kiemele said petroleum products are bought and sold with U.S. currency, so Canadians buy wholesale gasoline and diesel with a weak loonie.

“Every time the dollar drops, we pay more for diesel in Canada,” he said.

“If the dollar is high we benefit from a lower acquisition price and if it’s low we pay more…. (Right now) we have higher refining margins and we have the huge hit with the dollar.”

About the author

Robert Arnason

Robert Arnason

Reporter

Robert Arnason is a reporter with The Western Producer and Glacier Farm Media. Since 2008, he has authored nearly 5,000 articles on anything and everything related to Canadian agriculture. He didn’t grow up on a farm, but Robert spent hundreds of days on his uncle’s cattle and grain farm in Manitoba. Robert started his journalism career in Winnipeg as a freelancer, then worked as a reporter and editor at newspapers in Nipawin, Saskatchewan and Fernie, BC. Robert has a degree in civil engineering from the University of Manitoba and a diploma in LSJF – Long Suffering Jets’ Fan.

Markets at a glance

explore

Stories from our other publications