It seems fuel prices always rise just before the May long weekend.
But according to a petroleum industry analyst, that jump at the pump probably won’t happen this year.
“I think going into the spring, we will continue to see depressed demand for petroleum products,” said Michael Ervin, president of MJ Ervin and Associates, a Calgary consultancy specializing in petroleum marketing.
“And with that, I don’t see the kind of seasonal bump up in gasoline demand nearly to the extent we have in the past.”
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Ervin said that is good news for farmers because refiners are unlikely to switch production to gasoline and instead will continue to produce ample supplies of diesel.
“I think that diesel production is likely to hold the interest of refiners going through the spring,” he said.
“And that certainly is to the benefit of the consumer, such as farmers.”
Ervin’s website at mjervin.com says fuel users in Canada are much better off than they were in 2008.
A March 10 survey shows that the average diesel price at the pump in Lethbridge was 78.4 cents per litre and gasoline was 82.6 cents per litre. Last March, diesel in Lethbridge was $1.162 cents and gasoline was $1.073.
In Saskatoon diesel was 78.4 cents per litre and gasoline was 92.9 cents. Last March, diesel was $1.214 and gasoline was $1.144.
Ervin said falling diesel prices couldn’t be explained simply by plummeting crude oil prices.
“The wholesale price, which is referred to as the rack price for gasoline, was actually below the price of crude oil,” he said.
As well, the losses that North American refiners incurred making gasoline were a long-term problem.
“Based on New York crude and petroleum product futures, refiners were losing money on gasoline for the last three months of 2008,” said Spencer Knipping, a petroleum analyst with the Ontario energy ministry.
“I’ve never seen a run of losses like that.”
As a result, refiners shifted as much production as possible to diesel, which was still profitable.
“I’m not sure what the percentage range is … but you can shift five percent over in fairly short order,” Knipping said.
The shift from gasoline to diesel partially answers a question annoying Canadian consumers – why haven’t gas prices dropped as much as crude oil, which has fallen from $140 US per barrel last year to less than $50 ?
“The wholesale price (of gasoline) has gone up,” because refiners shifted production away from gasoline, Knipping said.
“We’ve seen inventories declining in gasoline.”
He said legislated ethanol requirements in the United States and Canada will cut into future gasoline demand. In comparison, the required renewable component of diesel is lower in both countries.
Knipping also advised watching how much the Organization of Petroleum Exporting Countries’ cuts production to try to support the price of crude.
