Gas prices here in southeast Saskatchewan have seen some fluctuation with prices dropping over the last week and have now rebounded back over the $1.50 mark. Patrick De Haan, the head of petroleum analysis with GasBuddy, states that many factors go into these rapidly changing prices.
“A lot of that has to do with economic weakness combined with falling oil prices, not just in North America, but abroad as well. China’s economy has really been struggling in the last few months. Oil demand has been lower as a result, and with North American demand also a bit soft this summer progressing into the fall, now there's less demand from road trips, summer vacations are over, schools have reopened and so gradually as temperatures cool, gasoline demand continues to throttle back into the fall.”
As well, the annual switch from summer gasoline to cheaper winter gasoline has contributed to a slight decline in gas prices. Diesel prices however with cooler weather on the horizon will most likely increase as the demand for heating oil increases. De Haan notices there’s almost a reverse action occurring between diesel and gasoline prices.
“I think diesel, which is what many farms stock up on, it's probably about time to consider doing just that. Diesel prices do tend to start increasing as we get into colder weather, demand for heating oil goes up and so that pulls diesel prices up. When it comes to gasoline, I do think that there's plenty more downward potential for gasoline in the weeks ahead. As I mentioned, demand for gasoline continues to seasonally decline as air temperatures get colder. Canadians generally, along with their American counterparts, don't drive as much.”
Also, Hurricane Francine down in Louisiana and east Texas threatened to shut down major oil refineries in the area. However, as the storm weakened when entering inland and Louisiana began cleaning up the mess, refineries were able to fire back up quickly stabilizing the gas price market.
Although gas prices aren’t out of the woods yet as De Haan states, economic uncertainty both in the United States as well as abroad will have significant impacts on not only gas prices but everyday living with interest rates climbing.
“Gas prices are going to be tough here in the next few weeks. We have significant economic news potentially later this week. The US Federal Reserve, which is certainly a driving force of global interest rates will be potentially cutting interest rates for the first time in several years. Depending on the amount of the cut to interest rates, it certainly could set off some alarm bells. The Federal Reserve in the U.S. is poised to cut rates and if they cut by a smaller 25 basis points, that could kind of cause oil prices to rally a bit.”
“However, if the (Federal Reserve) cuts more than that, and the U.S cut 50 basis points, it could be suggested that there's data which could show more economic weakness and then cutting interest rates 50 basis points could be construed as a negative for the economy, which could bring oil prices lower. So, there's a lot that's hanging in the fold right now when it comes to where oil prices will go in the weeks ahead and months ahead.”
This uncertainty surrounding the United States economy should raise some red flags surrounding gas and diesel prices, and those looking to stock up on winter fuel should look to stock what’s necessary in the meantime and keep a watchful eye on not only our American counterparts, but the global economy as a whole.