Calgary motorists should prepare to 'dig a lot deeper' at the pump

Analysts are offering Calgary drivers little hope for relief from rising pump prices, with one predicting that the increases will come "fast and furious" in the days ahead.

"Motorists — be prepared to dig a lot deeper," said Patrick De Haan, head of petroleum analysis at GasBuddy.

De Haan said the average gasoline price in Calgary on Thursday morning was a $1.539 per litre, up roughly a penny a litre from the day before and eight cents from a week ago.

And he expects price increases will come "pretty fast and furious" now.

"Stations now [are] raising prices to $1.579," De Haan said. "Most stations could go up to $1.60 by the time the weekend hits."

According to GasBuddy, the average gasoline price in Alberta on Thursday morning was $1.502 per litre, while the Canadian average was $1.602.  

The increase in gasoline prices in Calgary and across the country comes with a spike in oil prices, which have climbed to seven-year highs.

A big driver is concern about what impact Russia's war on Ukraine — and sanctions on Russian energy — will have on the global energy supply. Russia is one of the world's largest oil-producing nations. 

"At this point, we will continue to see [gasoline] prices going up as long as the situation worsens," De Haan said.

"We're also switching back to more expensive summer gasoline in the weeks ahead, so it's conceivable that Calgary's average, which sits at $1.539 today, could rise to $1.65, maybe even $1.75 by the time June rolls around."

Jeremy McCrea, director of Raymond James Energy Research in Calgary, said Russia isn't the only factor that's been driving up oil prices recently. 

He said demand for oil has come back strong from its pandemic lows, while a lot of producers worldwide have cut back on their spending programs. 

The North American benchmark oil price was hovering around $110 US a barrel on Thursday.

"Despite higher prices, we haven't really seen a response in supply here," McCrea said. "So you're dwindling world inventories quite rapidly than I think anybody had really anticipated."

He said what's caused the recent spike is the Russia-Ukraine crisis and growing calls for the United States and other countries to effectively ban the import of Russian oil.

McCrea said ramping up production in North America doesn't offer an immediate solution, adding that securing drill rigs and crews poses significant challenges, even if a company might want to spend the money.

The other challenge is that while the spot price for oil is $110 US a barrel, the outlook for prices in the future is not nearly as high.

"If you start looking at the prices 12 months from now, you're back to that $75-$80 range," McCrea said.

"So there's a lot of operators who say, I don't mind drilling if I get $110, but I'm not going to be able to get that because if you start looking at the strip for oil prices, it goes down quite a bit here over the next few months."

One development that might ease some pressure in a very tight oil market would be if the U.S. and Iran agree soon to a nuclear deal that would lift American sanctions and improve crude supplies.

Still, the rise in pump prices isn't expected to ease any time soon and gasoline prices will also rise in April when the federal carbon tax will climb to 11 cents per litre, up two cents.

That's one reason Conservative MP Michelle Rempel Garner, who represents Calgary Nose Hill, is calling on the federal government to hit pause on the increase in the carbon tax.   

She said increased energy costs also lift the price of other goods, like groceries, at a time when many Canadian families are struggling with inflation.

"There's not one magic policy solution that is going to fix this," she told the Calgary Eyeopener on Thursday.

"But I do think we are in a time where we need to triage and look for a low-hanging fruit. And an increase on energy costs right now, particularly in Alberta, is going to have an impact on the most vulnerable in our community."