Canada's Gas Prices Expected To Soar

Hurricane Ike forces closure of refineries along the Texas coast

Hurricane Ike made a splash on the Texas coast Friday night, forcing closure of oil refineries in its expected path. The closures could raise gas prices across Canada by as much as 13 cents per litre. Hurricane coverage, A11.Photograph by : Carlos Barria, Reuters

Kelly Sinoski, Vancouver Sun, Andrew A. Duffy, Canwest News Service, Vancouver Sun; Canwest News Service

Gas prices were expected to jump as much as 13 cents a litre across Canada and parts of Metro Vancouver over the weekend as Hurricane Ike threatened to strike U.S. refineries along the Texas coast.

Drivers in some parts of the country, including Greater Victoria, already faced soaring gas prices Friday because of the storm. Gas prices at the pumps around Victoria leapt 13 cents to $1.52 a litre overnight Thursday from $1.38 -- the average price at the pumps for drivers in Metro Vancouver Friday.

In Metro, gas prices remained relatively steady, with the highest prices at $143.9 a litre at a Coquitlam Shell station in Coquitlam, followed by $1.42 a litre at six stations across North Vancouver, according to Gasbuddy.com.

Despite the stable prices, however, Metro drivers were still paying more for gas than the national average of $1.35 a litre.

Industry analyst Jason Toews, co-founder of national gas-price site Gasbuddy.com and Victoriagasprices.com, blamed the rising gas costs on the hurricane, which forced the closure of refineries and evacuations in its expected path. The shutdowns hurt supplies, he said, while evacuation orders drive up demand as affected states start to run low on gas.

"First there was Hurricane Gustav, which had an effect on crude oil and refined gasoline production and now we have another one coming that looks worse and so they are shutting down refineries," Toews said.

He said drivers will go to neighbouring states to fill up, leading to supply problems which then ripple northward to Canada.

He couldn't say how long drivers would face jacked-up prices. If there are no more hurricanes or terrorist attacks, he said, there could be a decrease within two weeks.

Toews predicts gas prices in Metro Vancouver and Victoria could drop to $1.10 to $1.15 per litre range by December. If so, it would bring gas prices in line with what they were a year ago.

"Before Hurricane Katrina, three years ago, we never saw gas prices over $1 per litre. Now we feel 99 cents is cheap, and that is part of the problem -- we get desensitized to high gas prices, we think it's cheap and then we resume our old driving habits," he said.

It remains to be seen if the price jump is a blip or if carries long-term effects. Analysts warn there is a risk that prices could keep rising, especially if Ike damages oil refineries in Galveston Bay.

If the refineries, vulnerable to flood and wind, are damaged, it would take them about four weeks to get up and running again, said Peter Buchanan, senior economist at CIBC World Markets.

"We won't know the answer in full until the hurricane comes ashore," he said.

The soaring gas prices fueled debate over whether the price spike was weather-justified or exploitation by the gasoline companies.

At the same time gas prices were rising, crude oil was on its way down. For the first time since April 2, the price of oil briefly fell below $100 US a barrel Friday.

The price of oil has been declining amid forecasts that a slowing global economy will curtail energy demand. Oil first burst through the $100 threshold on Jan. 2, the first day of trading for 2008. It peaked at $147.27 on July 11. It has gained 35 per cent since a year ago, when it traded in the $74 range.

But it was the bad news of gas prices that took centre stage for campaigning Canadian politicians Friday.

Prime Minister Stephen Harper said in Halifax it appeared retailers were using the shutdown of refineries in the path of Hurricane Ike as a pretext to gouge consumers. "It certainly seems that way to me."

Harper said his government could not make policies in response to the daily fluctuations in gas prices, although he hinted that he will have a policy announcement that addresses the price of gasoline later in the campaign.

In St. John's, N.L., NDP Leader Jack Layton seized on a sudden increase in gasoline prices to blast the Conservative government and its predecessors for inaction.

Layton said an NDP government would take immediate steps to stop consumer gouging, unveiling a consumer-protection plan to tackle the "income squeeze."

"We'll stop price gouging at the gas pumps with a tough monitoring agency, a gas prices ombudsman and reform to the competition legislation of this country," he said.

The overnight spike came at an awkward time for Liberal Leader Stephane Dion, who made his first campaign stop in B.C. Consumers in B.C. already face among the highest gas prices in the country, while support for the provincial carbon tax is dropping. The B.C. Liberal government instituted a new 2.4-cents-per-litre tax on gas at the pumps in July, which will rise to 7.2 cents by 2012. The federal Liberal carbon-tax proposal exempts gas at the pumps, but University of B.C. political scientist Kathryn Harrison says this distinction is sure to be murky among voters on the West Coast.

Campaigning in Burnaby, Dion saw things differently. "The main reason why the price of oil is set to go up . . . is because humanity is asking for more and more oil, you have demand that is booming much faster than the supply," he said. "That's why the timing is wonderful today," he told reporters as he unveiled ways his environmental plan would reduce demand for oil and gas and develop new sources of energy.

ksinoski@vancouversun.com

Source: Canada.Com