Gas prices in Red Deer on May 4 averaged 79 cents per litre.  (rdnewsNOW/Troy Gillard)

By Troy Gillard

jump at the pump

Gas prices will fluctuate along with reopening economies: GasBuddy

May 4, 2020 | 5:00 PM

If you think you’ve noticed a sharp rise in gas prices of late, you’re right.

The average price for a litre of gas in Red Deer on Monday was 79 cents per litre. That’s 14.5 cents/litre higher than the average price at this time last week, according to GasBuddy.

Patrick De Haan, Head of Petroleum Analysis for GasBuddy, says there are two major factors for the sharp increase.

Refineries drastically cut production in response to more people staying at home and spending less time on the road due to COVID-19 restrictions.

The other part is that many provinces, including Alberta, and American states have started loosening these restrictions, leading to demand for fuel beginning to rise.

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“That’s Economics 101 that, if demand plunges, prices will likely go along with it, and if demand goes up, so will prices. Indeed, gas prices are very much tied to the future with an improving situation leading to higher prices,” De Haan says.

While Alberta could see more businesses, such as retail stores, hair stylists, daycares, and museums reopen as early as May 14, De Haan sees gas prices staying relatively flat in the short term with minimal growth after last week’s jump.

“The price of oil jumped 42 per cent last week, so there may be a little bit of an increase in gas prices that’s yet to come,” he adds.

De Haan says the longer-term forecast is even tougher than normal to predict. He feels we will have to wait and see how oil refineries respond to the changing economic conditions in the weeks and months ahead.

“Will they increase gasoline production, which would lead to an increase in gasoline inventories, or will they continue to hold a tight rope on production, and thus, cause gasoline inventories to decline? That’s really the defining moment here.”

The final deciding factor in the price of gas going forward is the ongoing price war between Saudi Arabia and Russia.

On April 12, officials with the Organization of Petroleum Exporting Countries (OPEC) agreed to cut their global production of oil by 9.7 million barrels per day for May and June.

“We’ll have to see, with data coming out perhaps in the next few weeks, if OPEC countries, if Saudi Arabia, if Russia are abiding by those agreements,” De Haan suggests.

The average gas price in the province, as of May 4, 2020, was 79.2 cents per litre, which is still significantly less than last year’s average of 125.9 cents per litre.

(With file from David Opinko, Lethbridge News Now)