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The Mystery of Low Gasoline Prices

The complex reasons for our current low gasoline prices relate directly to Canada’s economic health and to our national security. Recent events have prompted identification of three such reasons.

Injury lawyer talks bout gasoline prices

Early last week (January 21, 2015), the West Texas Intermediate oil price benchmark dropped to USD $46.39 per barrel, less than half the price WTI traded for six months ago. This development was duly noted at oil and gas conference underway at the same time in Calgary presented by the Conference Board of Canada. Attendee Edward Morse, the global head of commodities at Citigroup said: “The largest refining market in the world, the U.S. market, has been depriving OPEC countries … incrementally, and perhaps on an accelerated basis, of their largest market…

Slightly more than 10 years ago, the U.S. and Canada imported more than 2.6 million barrels of crude per day. Today [they] … are importing roughly 300,000 barrels per day from outside of North America. As a result, Saudi Arabia is keen to flood the market with oil and keep prices low, thereby forcing the U.S. and Canadian players to cut their production. The result would be the Saudis and OPEC regaining market share at North American refineries.” In summation, Mr. Morse added: “It will be a big sweat before it’s all over.”

At the end of the same week, the death of the Saudi King and the seizure of control of the government of Yemen through force of arms by rebels have highlighted the extent to which Saudi oil pricing policy may also have other effects.

In a syndicated article dated January 26, 2015, Charles Krauthammer of the Washington Post Writers Group explains that, with the fall of Yemen, Iran has effectively secured a “pincer-like” grip over the Arabian peninsula and that consequently the Saudis, “are fighting back the only way they can — with massive production of oil at a time of oversupply and collapsing prices, placing enormous economic pressure on Iran. It needs $136 oil to maintain its budget. The price is today below $50.”

As the newspaper National Post noted recently, “Western Europe, the Americas, Japan, and Australasia (have been given) a $1 trillion Christmas gift in the reduced world oil price…”

All of this is having at least a momentary effect on the way we live. A road trip or a Sunday drive may suddenly be an affordable outing for many people. The question remains, however: how long will the price reduction last? Is this just a temporary anomaly, or is this the way it will be for some time to come? Whatever the answer turns out to be – and it seems there is no way of predicting anything in this regard – the movement towards the production of motor vehicles powered by non-traditional means, should and will continue.

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