If you remember it costing less to fill your tank at the pump last time oil prices were this low, you remember right.
West Texas Intermediate oil closed down $2.14 to $57.81 (U.S.) Friday, the steady drop in prices compounding bad news for many oil and gas producers whose stock trades on the Toronto Stock Exchange, which saw its biggest one-day drop in more than 18 months Monday.
Drivers, however, were celebrating earlier in the week, as falling oil prices meant gasoline prices dipped below $1 per litre for the first time in four years at pumps across the city.
But current gas prices are still about 17 cents a litre more expensive than the last time crude oil prices were this low, in July 2009, according to Dan McTeague, a senior petrol analyst with GasBuddy.com and former Liberal MP who also runs the gas price tracking website Tomorrow’s Gas Price Today.
Drivers are noticing the discrepancy, he told the Toronto Star Friday.
“This is a huge, huge observatory issue for motorists.”
Dozens of people have contacted him in the last week wondering why prices haven’t dropped by more, McTeague said.
His answer is threefold:
• Today’s the loonie is weaker than it was in July 2009, sitting at 86 cents U.S. Friday versus 92 or 93 U.S. cents five years ago. That accounts for a seven cent increase in prices, McTeague said.
• Also contributing to the increase at the pumps is Ontario’s harmonized sales tax. It was implemented in July 2010, a year after oil prices were last this low, McTeague said. The net effect of the provincial portion of the HST, eight per cent, accounts for about a nine cent increase on today’s gas prices.
• Lastly the retail margin on gas in the Toronto market has also increased by 1.5 cents over the past five years, from about 6.5 cents to eight cents, McTeague said.
Altogether, the three changes amount to an approximate 17.5 cent per litre increase in gas prices since the last time oil was this cheap.
“If (the three factors) were the same as 2009, we just changed the dates, (drivers) would be paying 83, 84 cents per litre,” McTeague said.
Customers are shrewd, McTeague added. The last time oil prices were this low wasn’t that long ago, and motorists remember filling their tanks for less.
But there’s nothing they can do, he said. In fact, McTeague predicted gas prices in Toronto would increase by one cent Saturday, from 100.9 cents per litre to 101.9 cents per litre.
“There’s no reason for it. Likely one company has decided they want to make another couple bucks, and others will follow.”
Despite the slight increase overnight, Ambarish Chandra, an economics professor at the University of Toronto, said motorists can expect gas prices to come down if oil prices stay low in the coming months.
“Oil companies and gas stations are waiting to see if this is the new normal; they don’t feel pressure to drastically cut prices yet.”
Chandra said research shows when oil prices fall, gas prices fall, too; the drop in gas prices just isn’t as steep.
“A lot of us have gotten used to the days of expensive gasoline,” Chandra said. “For now, most consumers consider (the drop to less than $1 per litre) a good thing.”
- With files from Madhavi Acharya-Tom Yew