Canadian gasoline prices will stay high but stable amid violent political unrest in the oil-rich Middle East, industry analysts say.
The national average for a litre of regular gas in Canada on Tuesday was $1.13, according to price monitoring website Gasbuddy.com.
That’s up about 14 per cent from the same time last year but little changed from a month ago, when the political tension in the Arab world heightened with regime changes in Tunisia and Egypt after widespread protests in both countries.
Prices at Canadian pumps have stayed relatively stable despite oil prices for April delivery soaring to the highest level in more than two years around midday Tuesday, at US$94.29 per barrel, up $4.58 from the day before.
The North American supply of crude oil is high right now, keeping prices relatively lower than in other parts of the world, said oil and gas equities analyst Chris Feltin of Macquarie Research in Calgary.
“Canada is not reliant on international producers to supply us with gasoline. The gasoline that we consume here in Canada is from crude that we produce within our own borders,” Feltin said.
“Oil inventories remain healthy and we shouldn’t expect to see a major price shock in the near term,” he said, adding that Canadians could see higher prices if there is a production interruption in the Middle East lasts more than a year.
Feltin said any suspension of oil production activities in Libya won’t make a big difference to total production at Suncor Energy (TSX:SU), which produces about 35,000 barrels of oil per day in the country.
The Calgary-based company hasn’t disclosed whether any production has been suspended. It said Tuesday that its personnel are safe but that it won’t provide details out of concern for their safety.
Oil analyst Phil Flynn of PFGBest brokerage in Chicago said Canada is currently avoiding big jumps in prices because domestic oil production acts like a shock absorber when the production of Mideast oil is disrupted by the kind of unrest currently seen in Libya and other countries.
“I think increased production in Canada, new pipelines coming in from Canada (to the U.S.) and record supplies in the United States is keeping the market well rounded right now,” he said, adding that a promise by major producer Saudi Arabia to pick up the slack has also helped keep prices down for now.
“When you hear those kinds of comments I think the market is not as frantic as it was before, but let’s face it: do we really feel confident about that excess capacity if this movement in the Middle East continues to spread?” he said.
Flynn said if unrest moves to other oil producing countries in the region, such as Saudi Arabia, there could be a $20 spike on a barrel of oil that could push the cost of gas up for Canadians.
There are reports that the Libyan government has waged a bloody crackdown on anti-government protesters, who are calling for Moammar Ghadafi to step down after more than 40 years in power.
Libya is home to the largest oil reserves in Africa, pumping out approximately 1.8 million barrels per day, according to the U.S. Energy Information Administration.
Oil powerhouse Saudi Arabia said Tuesday it would ramp up production to 12.5 million barrels per day from its current eight million to offset any supply disruptions from other oil producing countries in turmoil.
But Flynn said the possible ouster of Gadhafi could ultimately lead to lower oil and gas prices in the long run.
“Hopefully a change in regime is going to be a good thing. If you get democratic government in there, you get better management of their oil fields, we can actually see more oil, not less,” he said.
“But we can’t dream about that right now we have to deal with the protests we’re seeing in the streets and that’s keeping the market right now as strong as it is.”