TORONTO — The wild ride at the gas pumps continued Tuesday, with prices soaring in Canada’s largest city and throughout much of Ontario while remaining flat or even falling elsewhere in the country.
In Toronto, motorists saw pump prices soar more than six cents a litre overnight to about $1.39 for regular on Tuesday. In Hamilton, Kitchener-Waterloo and Ottawa, prices were up more than a nickel, ranging from a low of $1.32 a litre in Ottawa to almost $1.39 in Hamilton, according to GasBuddy.com.
Prices have bounced around across Canada in recent weeks, but have generally been trending ever higher. According to price tracker GasBuddy.com, a litre was $1.37 on average in Toronto a week ago but $1.33 on Monday. A month earlier it stood around $1.28.
In the eyes of at least one analyst, the root of the problem lies south of the border, branching off into inventory shortages as well as very high crack spreads, industry parlance for the margins oil companies make by turning crude oil into gasoline.
The Canadian market is driven by what is happening in the United States, where gasoline inventories are down because of problems at refineries, said John Voros, senior petroleum analyst at En-Pro International in Oshawa, Ont.
“This has created some concern about supply of gasoline in the marketplace and the Canadian industry is following that directly and that is what they’re using to help support higher gasoline prices,” he said.
“We’re (also) getting into the beginning of gasoline season, which normally starts the May long weekend” when demand goes up, he added.
A weekly pump price survey compiled by Kent Marketing Services said the average price in Canada for the week ended Tuesday was just over $1.35 per litre. Toronto was among the pricier cities, with an average price of just under $1.40 per litre, according to the survey.
Elsewhere, price increases were more moderate and even declined in many places.
Montreal, for example, saw pump prices drop an average of half a cent to $1.39 at midday, while prices in both Edmonton and Calgary were down less than a penny at between $1.19 and $1.21 a litre respectively. Vancouver, down fractionally earlier in the day, was up almost half a cent near $1.38 a litre.
On a province-by-province basis, GasBuddy.com found the price trend steady or down in most provinces Tuesday, but up in Ontario and Saskatchewan.
Asked about regional differences, Voros said gasoline prices in Eastern Canada are driven by the events in the New York harbour area, while in Western Canada things are “more dictated by what’s happening in the Midwest marketplace, in Chicago.”
“It does cascade across Canada,” he said. “It may not happen as quickly in the West, but you will catch up.”
Voros also noted that crack spreads in the Toronto this time last year and in 2009 were about 17 cents per litre.
“Now we are seeing crack spreads in the area of 27 to 28 cents per litre. It’s gone up at least 10 cents over what they were in the previous three years.”
The high for Canadian gasoline prices of just over $1.42 a litre for regular was set in September 2008 amid hurricane weather in the Gulf of Mexico. It also came just a couple of months after West Texas intermediate crude spiked to a record intraday high in July of US$149.68 a barrel on the New York Mercantile Exchange, well above Tuesday’s closing price of US$103.88.
Surging pump prices haven’t been bad news for the auto industry so far, as improvements in both the North American and global job markets continues to drive sales, according to a new report Tuesday from the Bank of Nova Scotia.
However, pump prices are driving an increasing number of motorists to opt for smaller, more fuel-efficient cars.
Scotia Economics said sales of compact cars and small CUVs (crossover utility vehicles) jumped 23 per cent in Canada in April compared with a year earlier, a sharp reversal from previous months when pickups and minivans were leading the way.
In the United States, sales of such vehicles were up a whopping 40 per cent in both March and April and now account for nearly one-quarter of overall volumes, up from only 18 per cent in 2007 and less than 20 per cent in 2010, it said.
“Even with the shift to smaller vehicles, automaker profitability continues to improve,” said Carlos Gomes, senior economist and auto industry specialist, Scotia Economics. “Earnings for the two largest North American automakers jumped to roughly US$2,400 per vehicle in their home market — a 10 per cent increase from the 2010 average.
The improved profitability reflected rising vehicle transaction prices, in part due to lower incentives, which in the U.S. are at the lowest level in more than five years, he said.
Globally, Scotiabank found auto sales continuing to strengthen despite both the increased gasoline prices and a sharp plunge in Japan following the March 11th earthquake and tsunami. However, a shortage of parts and its impact on assembly plants outside Japan is expected to hurt sales going forward.
Asia — excluding Japan where automakers have been forced to slash production 57 per cent — will be particularly hard hit. “We estimate that these cutbacks will reduce vehicle output in the region by 13 per cent between April and early June,” the bank said.
Meanwhile, the report found U.S. car and light truck sales remained above an annualized 13 million units for the third consecutive month in April.
Sales in Canada have also strengthened in recent months, averaging an annualized 1.67 million units in March and April, well above the bank’s full-year 2011 forecast of 1.59 million units.
“Given the stronger-than-expected performance in Canada, we are maintaining our full-year sales forecast unchanged even as volumes are expected to weaken over the summer and early autumn, due to a shortage of vehicles from Japanese automakers,” Gomes said.