The Statistics Canada consumer price index recently showed nationally averaged prices at the pump for gasoline rose by 3.5 per cent between February and March.
That’s the largest monthly increase in gasoline prices since August 1997, when prices rose 4.7 per cent.
Gasoline and diesel prices are tied to crude oil market fluctuations and crude oil is on the rise after hitting 20-year lows earlier this year.
The Organization for Petroleum Exporting Countries agreed in late March to sharply cut oil exports. The effect of the agreement has been higher prices for crude oil. Even non-OPEC countries, such as Mexico, are beginning to cut production. Analysts say the overall effect will be to draw down high inventories of fuel and push crude oil prices higher.
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Crude oil prices had been falling, from $33.43 a barrel for Edmonton light in January 1997 to $16.30 in December 1998.
Since then, however, they have regained ground thanks to spinoffs from the OPEC agreement, rising to $21.18 in March.
Besides the international agreements pushing prices higher, farmers and industrial users in North America are waking from the winter’s business slumber, creating increased demand for fuel.
“Fuel is a commodity. It is ruled by supply and demand … some speculation on the part of buyers and sellers,” said Michael Ervin, of the Calgary-based petroleum consultant M.J. Ervin and Associates. “Even if crude prices remained stable, the spring and summer demand would probably push prices up.”
Ted Darling of Alberta Agriculture said farmers are using less fuel as they reduce tillage.
“On the flip side, they need every dollar they can so if that means filling or refilling their tanks a little earlier than they might otherwise, then they probably will be doing it to save a few bucks later in the year,” he said.
The International Energy Agency reported last week that prices will likely rise, backed up by United States Department of Energy predictions of U.S. price rises for retail fuels through the summer.
There may be one bright spot for fuel consumers, said Ervin. OPEC members have a tendency to break their commitments to one another, causing stocks to rise and markets to drop.
“If this (OPEC) commitment is as successful as the last ones, then somebody will start cheating and prices will fall again.”
