I received a number of calls and emails last week from people expressing their concern (perhaps too soft a word) that pump prices had not dropped in lock-step with the price of crude oil. As you begin to stare down another work week or prepare to head out on vacation, you may be thinking the same thing. So let me shed a bit of light on what's been going on. The short answer is that, for the most part, gas prices dropped last week. The long answer is a little more complicated.
Last week, we saw crude oil prices drop about 13% to about $129 a barrel. After the markets closed on Friday, Reuters proclaimed that: "Oil's losses this week are the steepest in dollar terms since futures began trading in New York in 1983 and the steepest in percentage terms since December, 2004."
While the drop in the price of crude was getting a lot of media attention, so was the unfortunate "expert" prediction that it could take anywhere from 5 to 7 days before the price at the pump dropped in response. I heard it the moment my radio alarm went off on Friday morning..."Think gas prices are going down? Don't hold your breath..." and knew I'd be getting calls all day. Thankfully, the prediction didn't appear to be based on much research as prices had been dropping all week. A quick bit of research showed the following"
- Toronto was down 10 cents a litre
- Sudbury was down 7 cents a litre
- Montreal was down 7 cents a litre
- Vancouver - down 4.5 cents a litre
- Calgary - down 4 cents a litre
I picked a few examples and rounded a bit for simplicity. If you're looking for your community, check out the always well-researched, MJ Ervin. For up-to-date prices, just check out the site locator on our corporate website.
Now if you live outside Toronto, you are likely wondering why gas prices haven't dropped as much. To quote one of my favourite lines from Saturday Night Live's ChangeBank ad, "The answer is volume." A busy gas station in Toronto can go through one to two tankloads of gasoline in a day. As a result, Toronto gas prices are very sensitive to changes in commodity prices. And prices dropped a little less in the West as commodity prices for gasoline stayed stronger than those in the East.
As I've talked about before, gas prices and crude oil prices are connected, but don't always move in unison. Also, when crude oil was making it's upwards run last year, Canadian gas prices lagged well behind as the high Canadian dollar sheltered consumers from the full hit.
So what will happen this week? Well, I won't be making any predictions, except that others will likely step blindly into the media spotlight to predict the unpredictable. I'd bank on that one.
Photo Credit: Randy Son of Robert