With oil prices recently returning to some of their highest levels in years, experts say drivers should prepare to pay even more at the pumps as the summer driving season begins.
Those higher crude prices may help lift hopes for better days in Canada’s oilpatch, but it’s also contributed to higher gasoline prices as fuel demand starts to take off.
“I’m always not wanting to fill it up all the way,” said Peter Bleumortier, while fuelling a pickup truck last weekend in Vancouver, where prices had climbed to $1.70 a litre. “It’s like breaking the bank.”
The North American benchmark oil price has marched from below $50 US per barrel at the start of the year to well over $70 US a barrel more recently, nearing 2018 highs. It has had some talking again about $100 a barrel oil by next year.
It comes as the market broadly expects COVID-19 vaccines to bolster global oil demand, though there are concerns over the potential impact of the new delta variant.
Markets will be watching Friday when the oil-producing nations of OPEC are expected to decide how much to increase crude output over the coming months.
Canadian gasoline prices have also reached some of their highest levels in the last five to seven years, according to Patrick De Haan, head of petroleum analysis at GasBuddy.
A year ago, in April 2020, the average gasoline price in the country had plunged to 76 cents, he said. Earlier this week, the average Canadian gasoline price was around $1.36 per litre, according to GasBuddy.
And De Haan believes pump prices could continue climbing for a while yet.
“We will probably not see a peak in price for another potentially four weeks as demand is likely to continue to increase,” De Haan said in an interview this week.
“Keep in mind that the pandemic is just beginning to really ease in Canada. And over the next four weeks, as more people feel better about getting out, they’re going to do so.”
He doesn’t expect higher prices to hold back consumer demand.
“Even if [gasoline] prices do reach record highs, I don’t think that many Canadians are going to be persuaded to stay home this summer,” he said.
The rise in fuel and oil prices may also affect the price of other goods, like airline tickets, groceries and other commodities, De Haan said.
Economist Rory Johnston said higher oil prices can also help lift the value of the dollar, as well as government revenues from taxes and energy royalties.
“I think that the Canadian oilsands are also looking like they’re going to have really, really strong cash flows, really strong profitability,” said Johnston, managing director at the Toronto-based Price Street.
“That’s going to mean higher corporate taxes. It’s going to mean higher personal taxes for those people that are still on payroll.”
Higher oil prices are good news for oil companies aiming to rebuild their balance sheets after the sector borrowed heavily to survive a long downturn that saw thousands of layoffs.
Companies are also navigating a shifting energy landscape, including climate change, carbon policies and the long-term outlook for fossil fuel demand.
Analyst Jeremy McCrea said while company cash flows are improving, he doesn’t expect a big rebound in capital spending or employment in the industry this year.
“Jobs [will] come back a little bit,” said McCrea, who is with Raymond James and based in Calgary. “You’re going to see some spending pick up there, but very, very marginally.”
This spring, PetroLMI’s labour market outlook forecast “modest” growth in oil and gas jobs in Canada beginning next year, with recruitment for skilled workers becoming a concern.
The organization’s most recent data shows a steady rise in the number of exploration and production jobs in Alberta from December through May.
Some say it feels like things are beginning to turn around now.
Adam Waterman, a service rig co-ordinator with Baytex Energy, said there are already signals things are picking up again.
“Across the province, I hear that we’re iron rich and man poor,” Waterman said recently while working at the site of a former natural gas well near Camrose, Alta. “I haven’t been this bullish on Canadian energy for a lot of years.”
Scott Darling, president of Performance Energy Services, said his company was already busy doing abandonment work on well sites.
With $70 US oil, he thinks production work in the oilpatch will pick up again, increasing the competition for workers.
“People have left the province; [it’s] really hard to attract them back,” he said.