Strathmore has seen steadily increasing gas prices over the last several weeks, and most of our stations now sit at 149.9 cents per litre. This is similar to the provincial average of 146.2 cents per litre, and Gas Buddy's Head of Petroleum Analysis Patrick De Haan explained we unfortunately shouldn't expect relief anytime soon.
De Haan said oil prices have risen for seven straight weeks, and this rise is primarily artificially manufactured supply and demand from Saudi Arabia and Russia.
"A lot of the rise in the price of oil has really been at the hands of Saudi Arabia and Russia. Saudi Arabia back in June announced that it was going to cut a million barrels a day of oil production, something that they've extended now into the month of September. In addition, the Saudis have gotten the Russians on board, and Russia has now also cut oil exports," he explained.
While there's no concrete number on how much Russia cut back on production, De Haan estimates it's around the 500 000 barrels a day range.
"Russia and Saudi Arabia's intention is to push the price of oil up by curtailing production. So this is exactly what the Saudis were hoping for, when they started the production cut or when they initially announced that the price of oil was at $66 a barrel, so now it has had an impact and pushing the price of oil up, as oil now stands at $94 a barrel, some of the highest levels that we've seen of the year."
Even though many countries including Canada have put sanctions on Russian oil, De Haan explained oil is a global commodity, so this intentional set back in production impacts us even though we aren't buying oil from Russia.
While this is the primary cause of rising oil prices, it's not the only one, as De Haan explained extreme heat by the Gulf of Mexico has also halted oil production at refineries, further creating supply issues.
As for if/when we can expect prices to lower, De Haan isn't overly optimistic we'll see this in the near future. The primary way to lower oil costs would be for Saudi Arabia and Russia to bring production back up, which other countries have no control of. Even if the previously mentioned weather issues subside, De Haan said that additional production couldn't come close to matching the current shortage. That leaves only one unlikely option if we want to see a price drop.
"The only answer is to get people to consume less, and that doesn't look likely, although we do see demand fall into the Fall months, it probably won't be as much as needed to offset the million and a half million barrels a day that Saudi Arabia and Russia are holding back."
If Saudi Arabia and Russia agree to bring oil production back up by September, it's likely we'll see a price drop at the gas pumps. In the meantime, we should expect our wallets to take a bigger hit than normal.
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