Mike Machuk, a City of Red Deer Action Bus driver, refuels at the civic yards on Wednesday. The price of gas is down this week, and is expected to drop further, providing relief to public bodies such as the city, as well as motorists. (Photo by SUSAN ZIELINSKI/Advocate staff)

Gas prices start to tumble in Red Deer area

“Prices typically tend to go up this time of year”

Falling gas prices spell trouble for the economy, but it makes filling up at the pumps easier.

Allison Mac, petroleum analyst for Gas Buddy, said the lowest price in Red Deer in recent years was 64 cents a litre in February 2016, and that could be achievable again.

“I would not be surprised to see prices at that level in the coming weeks,” said Mac, whose company monitors the price of gasoline throughout North America.

She said the average price of gas had already dropped by two cents to $1.05 a litre since Monday, when world oil prices fell. Prices of 90.9 cents were common in Red Deer on Wednesday.

The tumble happened after Saudi Arabia slashed its crude sale price on Sunday, signalling the start of a price war after OPEC talks with Russia broke down without an agreement on production cuts.

She said by next week, the price will likely drop another five cents a litre.

“That is significant, given this time of year. We should not see prices drop. We’re heading into summer, we’re heading into spring. Prices typically tend to go up this time of year.”

Mac said with a “war of egos” between Saudi Arabia and Russia, it is difficult to know when prices will rebound.

“I don’t think this is going to last for the better part of 2020, but we don’t know. It could be tomorrow, it could be a month from now.”

The coronavirus outbreak creates another layer of uncertainty, with countries such as Italy and China on lock-down, she said.

“It, of course, adds to the tension. If people are not driving. If people are not flying. If people are working remotely, working from home, the demand for this product declines, and obviously, production will have to decline to meet the levels of demand,” Mac said.

Related:

Oil price war won’t last: Red Deer MLA

Oil price crash: What it means for Canada

Dean Krejci, chief financial officer with the City of Red Deer, said a drop in gas prices is always beneficial in reducing overall costs.

How much it will help depends on how long it lasts. It’s also a double-edge sword, because of the impact it has on provincial budgets, he said.

“Hopefully, (lower gas prices) will contribute to having a surplus at the end of the year in our fleet operations,” Krejci said.

City vehicles — from snowplows to lawn mowers to half-ton trucks — fill up at fuel pumps at either of the civic yards. Fuel tanks are also located at some fire stations for emergency vehicles.

Krejci said fuel is delivered on a weekly basis and the contract with the supplier will reflect price changes, so the city will see a reduction in fuel costs. But gas prices are only one of the factors in fleet operation costs, he said.

Red Deer RCMP have a separate fuel contract through RCMP K Division.

Jason Lenz, a director with the Alberta Wheat Commission who farms near Bentley, said lower prices are definitely good news for any producer who needs to fill up fuel storage for the coming spring.

Farmers in some parts of the province still have to complete harvesting interrupted by snow last year, but they may still have fuel on hand from last fall, he said.

“Gas in general, it isn’t a huge cost to us, but when we’re working on slim margins to begin with, any sort of lowering of input prices is a benefit.”

He said farmers have already seen about a 20 per cent drop in diesel prices. But in the big picture, sinking oil prices are not ideal for the overall economy, not to mention the unprecedented repercussions of the coronavirus affecting the globe.

“Nobody really knows how long it will affect the markets long term. Farmers, in general, are used to kind of riding the waves of the markets, the highs and lows.”

— with files from The Canadian Press



szielinski@reddeeradvocate.com

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