Gasoline has never been more expensive — and high prices are likely to stick around for a while

Dan McTeague, president of Canadians For Affordable Energy, says the average price of a litre of gasoline in Canada’s biggest market, the Greater Toronto Area, hit $1.67 per litre on Wednesday, the highest level it’s ever been. And he expects even more to come.

It’s an “inevitable response,” he said in an interview, “to the threat that the global supply of oil will be further tightened by sanctions on the Putin regime.”

Chaos in energy markets

Russia’s shocking move to invade neighbouring Ukraine has thrown markets around the world into chaos, perhaps none more than the energy market, since the country is one of the largest producers of oil and gas in the world.

Europe is a major buyer of Russian oil, which is a big reason why, so far, the punitive sanctions on the country have exempted energy products. But Vijay Muralidharan, senior consultant at energy analytics firm Kalibrate, says the market is anxious that five million barrels a day may soon be unavailable.

“The war has put fear into the market,” he said in an interview. While many factors go into the price of gasoline, the price of crude is the biggest one, so the worry that Russian crude may suddenly become unavailable is causing crude buyers to look elsewhere to ensure a dependable supply — even if it costs them more.

“It freaks you out as a buyer,” Muralidharan said. “Even if it doesn’t happen, there’s paranoia, so you bid up to make sure your supply is there.”

Seeking alternatives

Russia supplies about one quarter of the crude oil that Europe consumes every day, but in recent days, some some European oil buyers have shunned Russian crude, fearing that if sanctions were applied to Russian energy, their purchased oil could be rendered unusable.

“Cargoes have already been rejected by European refiners in the market, because people are afraid sanctions might be coming, and so they don’t want to be caught with some cargo they can’t resell,” said Amy Myers Jaffe, research professor and managing director of the Climate Policy Lab at Tufts University.

Canada hasn’t imported any Russian crude oil directly since 2019, but that didn’t stop the federal government from making a big show this week of banning all such imports from now on. And the U.S. does import hundreds of thousands of barrels a day of Russian crude, some of which may well find its way back to Canada in the form of refined products because the two countries are so integrated.

That’s why a conflict a world away is bidding up oil prices in North America, too, because they are all part of a suddenly insatiable and nervous global market

The North American oil benchmark known as West Texas Intermediate hit a new eight-year high just shy of $116 US per barrel on Thursday, and the blend of oil that comes from Canada’s oilsands known as Western Canadian Select has been rising by almost as much, topping $100 US per barrel at one point on Thursday.

That’s the highest price on record for oilsands crude since a brief blip in 2006.

That $100 figure is a “mind boggling” number, Muralidharan says, and it’s one of the factors that have added between 15 and 22 cents per litre to the cost of gasoline at the wholesale level since the conflict began — and that’s before it arrives at the retail level. 

“Refineries are already scrambling to produce gasoline and diesel,” he said.

McTeague says Canada’s reliance on U.S. refiners is once again a major factor in why Canadian drivers are paying more. “We price all of our fuel in U.S. [dollars]… so that makes the bad situation worse, which is why we’re looking at at least a five to six cents a litre increase,” on top of what we’ve already seen, he said.

On top of booming demand for oil leading to higher prices at the retail level, the federal carbon tax is slated to increase on April 1, a development which will add even more pennies to the price of every litre at the pump.

Prices unlikely to get lower

Worse still for drivers is that oil prices are very unlikely to head lower even in the unlikely event that the situation in Ukraine gets resolved quickly. That’s because crude prices today are for oil to be delivered next month, in April.

If Russian oil goes offline, Canada, the U.S. and even OPEC nations simply don’t have the capacity to increase production quickly, Muralidharan said. “It’s going to take some time [and] it won’t happen overnight,” he said.

WATCH | Gas prices soar across country: 

Record-breaking gas prices across Canada could keep climbing, experts warn

The cost of gas across Canada is rapidly rising, and with Russian oil supplies taken off the market, as well as OPEC nations failing to increase production, experts warn prices won’t come down anytime soon. 1:51

That’s bad news for drivers who are still trying to process prices where they are now. Filling up at just shy of $1.70 per litre in Toronto on Thursday, Lorenzo Duran told CBC News that he’s planning his trips more efficiently now, trying to squeeze as much as he can out of every tank.

“I’ve got to start walking,” he joked. 

Another driver, Darian Nielsen, says she’s taking public transit a lot more lately to offset the “absolutely insane” prices to fill up.

Route planning, walking more and taking public transit options may give drivers some relief in the short term, but ultimately, experts expect high prices to stick around, likely into the busy summer driving season.

So brace yourself, Muralidharan said: “You’re going to see the higher pricing is going to stick for at least a month and a half.”