Gasoline prices at Canadian pumps soared Wednesday while oil soared on the stock market, closing at a new record high of US$100.74 per barrel.
It was the second day in a row of market records -- crude oil prices closed above US$100 per barrel on Tuesday.
But a gas-industry watcher said that the two events aren't necessarily linked.
"It's a result of the fact that oil prices have been going up for the last two weeks," Michael Ervin of M.J. Ervin and Associates, a Calgary consulting firm, told CTV.ca on Wednesday.
"We've seen crude prices start to affect wholesale prices, and in turn, those wholesale prices have been edging up the past two weeks. And it's only now, two weeks later, that markets have finally cried 'uncle' and have had to pass that cost along to consumers."
Montrealers paid as much as $1.20 per litre today, the same price as Tuesday's high.
A litre cost about $1.10 in Toronto and London, and $1.13 in Vancouver. Those prices are up to four cents than they were Tuesday.
In Atlantic provinces with gas price regulation boards, the price spike was noticeably less severe. Nova Scotia saw prices between $1.11 and $1.15 - about the same as the day before, according to price-watcher GasBuddy.com. Gas also held still in St. John's, which proved one of the cheapest places to buy the commodity in Newfoundland and Labrador at $1.15.
The maximum price in New Brunswick was $1.07 and in Prince Edward Island, prices ranged from $1.04 to $1.06.
Prices in Calgary, which had spent most of the past week around the dollar mark, increased to around $1.02.
Bargain gas was available in Kingston, Ont. at 96.8 cents and in Edmonton at 98.9 cents.
Just one day earlier, on Tuesday, Canadians were paying an average of just $1.088 per litre, according to Ervin and Associates' weekly survey. But even that is up 4.6 cents per litre from the week before.
Prices to get worse as summer nears
Jason Toews, co-founder of gasbuddy.com, told Canada AM that the usual trend is to see lower prices in the winter, with summer driving up demand and prices.
But in general, things are worse than they were at this time in 2007, he said, noting gas prices are about 15 cents per litre higher than they were a year ago.
"A year ago today, crude oil prices were about $60 per barrel. Now they're over $100 per barrel. That's 66 per cent higher," Toews said.
"I'm expecting to see some large increases in the price of gas this summer, because of the high crude oil prices."
Toews thought the price could reach as high as $1.50 this year, adding he doesn't think collusion between the leading oil companies is to blame. He believes it has more to do with competition among gasoline retailers.
"What generally happens is one brand will raise their price and other stations or their competition will follow suit,'' he told The Canadian Press on Wednesday.
While independent gas stations can set their own prices, corporately owned chains must follow directives of their regional managers, Toews said.
"Right now the retail gas stations aren't making that much money because people are so price sensitive on gasoline. But at the wholesale level they're making lots of money. The oil companies are having record profits,'' he said.
In January, CIBC World Markets chief economist Jeff Rubin predicted gas prices of up to $1.50 per litre by this summer.
The rise will affect Canada's economy in different ways depending on the region, TD Bank Deputy Chief Economist Craig Alexander told CTV's David Akin on Wednesday. Oil-producing regions such as Saskatchewan, Alberta, Nova Scotia and Newfoundland benefit while other regions suffer, he said.
"The obvious area to highlight is Central Canada," he said. "This has been a real challenge because it's created huge economic disparities over the last several years."
Alexander also pointed out that high oil prices also push up the value of the loonie, which is great news for cross-border shoppers and importers but bad for those exporting Canadian goods.
Futures driving crude oil price up
The contract for March delivery of light sweet crude, which was expiring later Wednesday, rose 73 cents to settle at a record $100.74 on the New York Mercantile Exchange after earlier rising as high as $101.32, a new trading record. On Tuesday, the contract jumped $4.51 a barrel.
The price, while high, is still below the peaks of early 1980 after adjusting for inflation.
"The oil price continues to be supported by concerns over oil supply," said David Moore, Commonwealth Bank commodity strategist, in a daily research note.
"There is speculation that OPEC will either leave oil production levels unchanged, or, possibly, even reduce production following the 5 March OPEC meeting," he said.
Other factors pushing the price up include the threat of new violence in Nigeria, where rebels have threatened to disrupt oil supplies, Monday's explosion at a major Texas refinery and simmering tensions between the United States and Venezuela.
Vince Lauerman, a Geopolitics Central global energy analyst, said gas prices tend to increase a cent for each dollar rise in the price per barrel.
"The main factor tends to be oil prices, but at the same time another extremely important factor is seasonal demand. Of course in summertime there's far more recreational driving going on, so demand bumps up substantially,'' he said, adding that for this time of year gas prices are actually relatively low.
Some analysts think the weakening U.S. dollar is also helping drive investors into the futures market.
With files from The Associated Press and The Canadian Press
