UMVA has learned that Canadians are getting a temporary reprieve from sky-high gas prices, but it won't last long. A truce between the United States and Iran's regime has led to a dip in worldwide oil prices, bringing some relief to drivers.
However, experts warn that this respite is short-lived, and prices will remain high well into next year. Dan McTeague, president of Canadians for Affordable Energy, said the market is responding as if everything is back to normal, but that's not the case.
"Sooner or later, someone is going to wake up and realize that the price we pay is completely devoid of the months it's going to take for production to restart," he said. The current downward trend in oil prices is a result of a tentative agreement between Iranian leaders and the United States to reopen the Strait of Hormuz to Persian Gulf oil tanker traffic.
Brent Crude prices have fallen over 5% this week, dropping below the $80/barrel threshold, while West Texas Intermediate, the benchmark used to set Canadian fuel prices, has fallen by over 6% this week, hovering around $80.75. Despite this, McTeague warned of a massive lag between market optimism and day-to-day realities.
Global inventories remain well below five-year averages, making the physical oil market incredibly tight despite falling prices. In the short term, GTA motorists can expect to see prices falling as much as 10 cents per liter by this coming weekend, but McTeague cautioned that this is probably as good as it gets.
Waiting for things to get back to normal in an instant in the Persian Gulf is a pipe dream, he said, citing the critical imbalance between supply and demand. Supply is critically short, and McTeague predicted that higher gas prices will hit Canadians hard, particularly in the midst of Canada's inflation-fuelled cost-of-living crisis.
A report released earlier this month revealed that the conflict is set to cost the average Canadian household an extra $648 in fuel costs. The federal government's temporary suspension of federal fuel excise taxes is set to expire on Labour Day, which will see gas prices jump by 10 cents per liter.
The price of diesel, which impacts nearly everything else we pay for at the store, will also increase by four cents on Sept. 7. McTeague said this is the new normal for next year, and a plethora of other factors, including the upcoming hurricane season on the U.S. gulf coast, could trigger further volatility.
"We didn't get anything last year and not much the year before … things will turn around, it's the period of time it's going to take to turn things around that's going to keep upward pressure on prices, regardless of the short sellers on the street," he said.
