OTTAWA — For Canadians breathing a sigh of relief as sky-high gas prices finally show signs of easing, it won’t last long. While worldwide oil prices continue their downward trajectory as a truce between the United States and Iran’s despotic regime seems imminent, Dan McTeague, president of Canadians for Affordable Energy, said prices will remain high well into the next year.
Oil Prices Down, But It Won’t Last
Worldwide oil prices have seen a significant dip this past week, thanks to a tentative agreement between Iranian leaders and the United States to reopen the strategically vital Strait of Hormuz to Persian Gulf oil tanker traffic. Brent Crude prices fell over 5% this week, falling below the US$80/barrel threshold and well below recent peaks of US$119/barrel. Here at home, West Texas Intermediate — the benchmark used to set Canadian fuel prices — fell by over six per cent this week, hovering around US$80.75 as of Tuesday afternoon.
Market Optimism vs. Reality
Lower prices aside, McTeague warned of a massive lag between market optimism and day-to-day realities: global inventories remain well below five-year averages, making the physical oil market incredibly tight despite falling prices. “All this is just the futures market responding as if the Strait of Hormuz is open, everything’s fine and back to normal, but that’s the problem — it’s not,” he told the Toronto Sun. “Sooner or later, someone is going to wake up and realize that the price that we pay is completely devoid of the months it’s going to take for production to restart.”
Short-Term Relief for Motorists
On the short term, GTA motorists can expect to see prices falling as much as 10 cents per litre by this coming weekend. “That’s probably as good as it gets,” McTeague said. “Waiting for things to get back to normal in an instant in the Persian Gulf is a pipe dream — there’s no way we’re going to get back to that all-critical economics 101 fundamental balance between supply and demand. Supply is critically short.”
Impact on Canadian Households
Higher gas prices are hitting Canadians hard, particularly in the midst of Canada’s inflation-fuelled cost-of-living crisis. A report released earlier this month by the Financial Accountability Office of Ontario said the conflict is set to cost the average Canadian household an extra $648 in fuel costs. As well, the federal government’s temporary suspension of federal fuel excise taxes is set to expire on Labour Day (Sept. 7), which will see gas prices jump by 10 cents per litre. The price of diesel, which impacts nearly everything else we pay for at the store, will also increase by four cents on Sept. 7.
New Normal for Next Year
“This is the new normal for next year,” McTeague said, adding that a plethora of other factors — including the upcoming hurricane season on the U.S. gulf coast — could trigger further volatility. “We didn’t get anything last year and not much the year before … things will turn around, it’s the period of time it’s going to take to turn things around that are going to keep upward pressure on prices, regardless of the short sellers on the street.”
