1. Crude oil prices are surging
As with gasoline, the cost of crude oil tanked last spring as COVID-19 wrecked economies and stopped people from traveling. To prop up oil prices, the OPEC cartel and its allies slashed oil production, though they’ve recently begun restoring some production.
But lately, crude prices have been soaring — because OPEC has been slow to boost output again. Oil in February hit $60 U.S. per barrel for the first time in over a year, and Goldman Sachs expects prices to hit $72 by summer, according to multiple media reports.
“Oil prices have continued to rally as global oil demand recovers from the worst of the COVID-19 pandemic,” says analyst Patrick De Haan of price-tracking website GasBuddy.
De Haan says gas prices could ease in the near term but then fly high again as summer approaches. To help hold down your driving costs, look for a better deal on car insurance. Having a solid credit score may help you bag a lower insurance rate.
2. Ottawa's emissions levy is going up
That Supreme Court ruling upholding the constitutionality of Prime Minister Justin Trudeau’s carbon tax plan will mean an extra 8.8 cents per litre at the pumps for Canadians, the Canada Revenue Agency says.
The federal government’s strategy is to gradually raise Canada's carbon tax on fuels from $30 per tonne to $170 per tonne by 2030. It’s part of an ambitious plan to not just meet but exceed the country's goal of cutting greenhouse emissions 30% below 2005 levels by 2030.
As a result, gas prices across Canada are expected to rise by more than 39.6 cents a litre by 2030, if not higher.
According to data from CAA, the average gas price in every province is already higher than a year ago.
Though gas prices are going up, mortgage rates are still quite low — meaning if you're a homeowner, one way to offset the rising cost of fuel is by refinancing your home loan. A good mortgage brokerage can help you find a new mortgage that works best for your situation.
3. Canadian oil production has fallen
In response to plummeting fuel sales and prices caused by COVID, Canadian oil production plunged 20% during the first half of 2020, according to data from the U.S. Energy Information Administration.
It marked Canada’s lowest production levels since 2016 when the Alberta wildfires caused production shutdowns. But now, tight fuel supplies are putting pressure on gas prices.
As oil output dwindled last year, so did jobs. Statistics Canada reports that the country saw its steepest-ever drop in jobs in the natural resources sector during the second quarter of 2020 alone, with almost 43,000 workers thrown out of work and left scrambling to make ends meet.
Many struggling Canadians have been leaning on credit cards more than usual, to get by during the pandemic. If that's you, a lower-interest debt consolidation loan can cut the amount you pay each month — and help you afford the higher prices at the pump.
4. Vaccinations are expected to boost travel
As more Canadians are vaccinated while 2021 rolls on and life begins to return to something closer to normal, people are likely to drive and fly more. And that trend will contribute to rising fuel costs.
“I think Canada’s vaccination rollout will potentially lead to greater demand, and a restoration of normal and perhaps a bit of pent-up demand being satisfied in the early stages of spring and summer,” industry analyst Dan McTeague says.
You can fight back by shopping around for lower gas prices, because they can vary by city and even what part of the city they’re in. Natural Resources Canada says the prices you see at the pump are influenced by factors including the size of the service station, its market and competition, wholesaler discounts and more .
To lessen the uncertainty, you might want to consider replacing your vehicle with a more fuel-efficient model. Find low-cost financing so you can trade your old gas guzzler for a car that costs less to run.
5. Summer will bring pricier gasoline blends
Canadian drivers could find themselves spending as much as $1.70 a litre this summer in cities like Vancouver, according to McTeague.
One reason will be the switch to pricier summertime blends of gasoline.
Winter gas is blended with cheaper, lower-energy butanes to increase the vapour pressure of gas so vehicles can start in colder temperatures. Refiners typically switch to summer gas by early to mid-April and generally switch back to winter blends around mid-September, according to the Canada Energy Regulator.
Looking for ways to save on the cost of driving is a smart strategy, no matter what you're paying for gasoline. For example, regular comparison shopping for car insurance can save you hundreds of dollars a year, studies have found.