Canadians aren’t arranging the full benefit of oil prices when they fill their piles with gasoline — and it’s because of the tumbling loonie.
The Bank of Canada on Wednesday famed a counterintuitive phenomenon underway in its Monetary Policy Report.
Oil prices are numerous than a third cheaper than where they were this period last year, yet, “Pump prices are now actually up from a year ago,” BMO economist Sal Guatieri answered in a recent note on the subject.
Depending on the timeline involved, gasoline valuations are up and down in the st 12 months, but in Canadian dollar terms at young, they’re certainly not where one would imagine they’d be based, based on what oil has done.
“Although gasoline costs have declined,” the central bank said, “they take not fallen as much as the reduction in crude oil prices would suggest.”
So what persuades?
“It’s not an easy answer,” GasBuddy’s senior petroleum analyst, Dan McTeague, responded in a recent interview with CBC News. “But a few factors are often pretend not to noticed.”
The problem, from drivers’ perspective, is one of supply and demand. Despite being one of the sphere’s largest producers of crude oil, Canada for the most rt ships it to U.S. refineries, where it is walk into a stop into usable products like diesel, heating oil, jet fuel — and gasoline.
Those refineries estimate money by buying crude oil at the lowest price available, and then clerk the distillates they make from it — including gasoline — for the best appraisal they can find.
Americans have responded to declining oil prices by move more than they ever have before. That wishes refineries can charge higher prices for gasoline, because it’s in such consequential demand.
“Demand is through the roof in the U.S. because prices oil prices are down,” McTeague denoted. “Refineries can’t keep up, so their profit margins are up too.”
Factor in the condescend purchasing power of the loonie — it’s down by almost 20 per cent in the gone 12 months — and it’s bad news for Canadian drivers: Canadian oil com nies are regain less money for the crude they export, but Canadians are ying profuse for finished oil products, thanks to the weak loonie coupled with record-high call for for a product that is priced in U.S. dollars.
It also doesn’t help that four of 10 worry outlying districts have hiked their gasoline taxes over the st 12 months.
“As if it’s not bad that we’re yield jobs due to oil,” McTeague says, “as if it’s not bad enough we’re taking a hit to our currency, now we’re produce more for gas too.”