Gas prices have jumped back up toward the $1.46.9 mark in Moose Jaw over the past week and many are asking questions about that sudden rise.
Prices have been relatively stable following the pause on the Carbon tax, but seeing prices at the pump — especially after a brief drop barely a week before — is an unwelcome change. But, according to Matt McClain, Petroleum Analyst with GasBuddy, there is a clear and unexpected reason behind the surge.
“There was (an oil refinery) actually on the U.S. side of things, in Whiting, Indiana, owned by BP. It went through a bit of a natural disaster last week,” McClain explained.
“A flood shut everything down and that has created some problems. Believe it or not, in places like Alberta, Saskatchewan, Manitoba, and also multiple U.S. states as well.”
With the flood forcing the facility offline a significant crimp in supply was created, according to McClain the impact in Saskatchewan was immediate.
“Across Moose Jaw, gas prices are up about 5.5 cents per litre. Across the greater (Saskatchewan) area, prices are up about 7.1 cents per litre over the past week,” he said. “That is pretty much directly attributed to the fact that that oil refinery had to go offline.”
The BP Whiting Plant, when at full capacity, produces up to 440,000 barrels of crude oil per day and supplies much of the American Midwest and Western Canada. Accommodating the sudden loss of supply means fuel is being sourced from further afield, increasing transport costs and tightening margins as a result.
The silver lining, according to McClain, is that relief could be on its way.
“BP says they are in the process of restarting. Things will slowly start kind of getting back to a sense of normalcy,” McClain said.
“We’ve got our fingers crossed for the holiday weekend that things will stabilize and/or begin to fall.”
Assuming no major damage was done to the facility during the flooding or shutdown, McClain expects to see a modest decline.
“Prices may even start squeaking downward — maybe one to two cents per litre, somewhere in that neighborhood.”
The jump in prices has varied on a city-to-city basis. Prince Albert took the biggest hit, with a 12-cent increase driving prices up to $1.43 per litre, Saskatoon followed suit, with a 10.5 cent hike, Regina’s price per litre was bumped up about 9 cents, trailed by Moose Jaw at 5.5 cents.
Prices in Yorkton and Swift Current, by contrast, have remained relatively stable with both centers sitting at $1.35.9 and $134.9 per litre, respectively.
While this week’s spike is being felt in wallets across much of Saskatchewan, McClain notes that we’re still better off than we were at this time last year.
“Overall, year over year, we are down almost 17 cents per litre. At this point last year, the average across Saskatchewan was $1.57 per litre. Right now, prices are still down about 16.9 cents per litre from last year.”
As for diesel users, especially those in transport, heavy industry or farmers deep in harvest season, McClain said they shouldn’t expect much to change — at least for the time being.
“No major upsets at this particular point,” he noted.
“In terms of relief, not necessarily so, but hopefully… things will not increase. It’s a glass-half-full and a glass-half-empty kind of a situation.”
He added that the upcoming switch from summer to winter fuel may also provide some additional relief at the pumps.
“Once we go back to the winter reformulated fuel products, that should actually help prices just a little bit — several cents per litre, somewhere in that neighborhood, three to five cents,” McClain said.
“That’s still a few weeks away, but longer-term, that’s the trend we’re expecting over the next 30 days.”
However, as with anything in oil markets, a few wildcards are at play.
“Geopolitical wildcards… those remain all across the globe, as well as hurricane season,” McClain added.
“The U.S. and Canadian markets are really interlinked when it comes to oil and fuel prices… what can impact one usually does impact the other.”
In the interim, keeping an eye on the headlines, the fuel tank topped up and waiting for things to stabilize is about all consumers can do.