To the list of things we associate with spring—chirping birds, tulips—analysts have made an addition: record-high gas prices. According to the Oshawa-based energy consulting company En-Pro International Inc., April showers will bring May gas prices of between $1.43 and $1.47 a litre—a 12 to 15 per cent increase from what we’re currently paying at the pumps. “You’re going to see the highest gasoline prices in history,” says Roger McKnight, senior petroleum analyst at En-Pro. McKnight says that though oil prices normally increase in the spring and recede after the May long weekend, this time the increase started in January, and will stick around through to mid-July. And it could spell big trouble for the North American economy.
Fuel prices are largely at the mercy of the Middle East, the world’s biggest exporter of crude oil. Perceived shortages and political instability drive prices up, and there has been plenty of both lately in the form of growing demand from China and India, and the international sanctions in place as a result of Iran’s nuclear program. In the U.S., the average national price of gasoline is nearly $4.00 a gallon (or $1.06 per litre), and fuel prices are becoming a big economic election issue. By some estimates, every one cent increase in fuel prices cuts economic growth in the U.S. by $1.4 billion. A big enough jump could tip the nation back into recession.
In Canada, which produces more oil than it consumes, the picture may not be so bleak. Those living in oil-rich regions such as Alberta, Saskatchewan, and Newfoundland can benefit from price hikes that create more jobs and higher wages. Those in central Canada, however, may be less fortunate. Craig Alexander, the chief economist at TD Bank Financial Group, predicts an increase of between five and 10 cents, which would put most provinces in the $1.30- to $1.50-litre range by the summer’s peak. Alexander calls the figure “extremely high and very painful on the wallet,” but points out it’s the retail sector that bears the brunt: “We’d rather eat out less and stay in to rent a video than cut down on mileage.”