Lars Christopher Nøttaasen
GasBuddy.com predicted that gas prices will reach $1.40 per litre this summer — the highest level since the summer of 2008. How will it affect our living?
Gas prices higher than in 2008
The gas price average is around $1.28 per litre. It is the highest price Canadians have seen since the fall of 2008, informed Business Review Canada. “We’re going to see gas prices jump around a little bit. But generally speaking, for the next month or so, we’re going to see gas prices more or less going up,” said Jason Toews, co-founder of the price-tracking website.
Why so expensive?
The growing trend is natural in all price areas, not only in energy. A percentage change in prices is measured by inflation and is rarely negative (it is called deflation if it is negative). Higher prices should be balanced by growing income. But why do we have to pay so much for crude oil and gas in Canada when we supply half the world? Toews answers: “These companies who produce the crude oil are looking to maximize their profits. It’s not a charity case. They’re not here for the good of Canadians, per se.”
High costs affect not only vehicle owners, but also crude oil prices, which will increase by about 70%. It may also influence energy and other industries, including the retail sector. Families’ consumer spending will be reduced due to higher energy and gas costs. As gas prices rise, Canadians prefer eating at home to spending money in restaurants.
Losses in various sectors
CIBC Economics reported that since September 2010, oil prices have grown by 23% and that Canadians spend around 6% of their spending on energy ($88 billion in 2010). With the price increasing, energy spending will raise an additional $12 billion. Industrial products and the raw materials used to manufacture these products were up 0.9% and 5.7% in March, respectively. The main reason for the growth was high oil and petroleum prices, according to Statistics Canada.
Calgarians can be optimistic
High energy prices are not bad news for everyone. Calgary, as the home of large energy companies, will benefit from this trend, supporting the energy market and new investments. “Sitting on the second-largest proven crude oil reserve in the world next to Saudi Arabia with an estimated 171.3 billion barrels — enough to meet Canada’s current oil demand for almost 400 year — is an obvious cause for economic optimism,” says Business Review Canada about the situation in Alberta. Robust investment and increasing oil exports will probably drive Alberta’s economic growth through the next years.