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  • bluecheese4u bluecheese4u May 29, 2009 9:22 AM Flag

    Gas will be cheaper this summer than last: Regulator

    Gas will be cheaper this summer than last: Regulator
    By Derek Abma, Financial PostMay 28, 2009

    OTTAWA — Canadians will be spared this summer from the skyrocketing gasoline prices of last year, says the country's energy regulator.

    The National Energy Board forecast that crude oil costs will stay within a range of $50 to $60 U.S. a barrel in the coming months, far short of the peak of $147 U.S. last July.

    Christian Rankin, the NEB's oil market analyst, said this and other factors should result in the price of gasoline staying close to the $1 Cdn a litre it is averaging now. Last summer, it reached $1.50 in some locations and averaged about $1.40 at its peak, according to MJ Ervin & Associates, a Calgary-based consultancy for the petroleum industry.

    Crude oil was trading at about $65 U.S. a barrel on Thursday, but Rankin said that is not out of line with the board's forecast, given the "degree of volatility" with oil prices.

    The bottom end of the NEB's forecast range would put oil at slightly more than a third of last year's peak, while the price of gas isn't expected to be reduced by nearly as much proportionally.

    "It seems to me that the prices for gasoline should be cheaper than we are getting at the moment," said Bruce Cran, president of the Consumers' Association of Canada. "It should be more reasonably priced."

    But Rankin noted that the price of oil accounts for only about 40 per cent of the total cost of gasoline. Taxes, along with refining and retail mark-ups, also come into play.

    Supply and demand ultimately play a role in pump prices, Rankin said, adding that the supply of gasoline this summer will be lower than it was last year.

    "This year, we've got very low inventories of gasoline in the United States, and that's helping to support gasoline at high levels," he said.

    Michael Ervin, president of MJ Ervin, said much more gasoline was produced than necessary last year, given the economic conditions, and that kept pump prices in check.

    Notwithstanding the record gasoline prices of last summer, Ervin estimated that drivers got a discount of about 15 per cent relative to what would've been charged in normal economic times.

    "This year, (gasoline producers) have learned their lesson, and production is more in line with demand," Ervin said, noting that vehicle travel is expected to be less than normal again this summer because of the economy.

    Liberal MP Dan McTeague, a regular commentator on gasoline prices, said he has doubts about the reliability of the NEB's forecast, because of the board's reliance on U.S. supply figures and lack of access to Canadian refiners.

    Given recent gains in the price of gasoline, McTeague said he would expect another five to eight cents per litre added by the middle of August. MJ Ervin's figures show the average price of gasoline rose to just more than $1 a litre this week from 95 cents two weeks before.

    Natural gas prices, the NEB said, should trade at between $3.20 and $4.20 U.S. per million British thermal units this summer, prices dwarfed by the $13 U.S. it reached last year.

    As well, the NEB said residents in all provinces except Alberta, and Newfoundland and Labrador are likely to be paying "somewhat higher rates" for electricity this summer than last due to actions being taken by their respective provincial regulators.

    It said electricity supply is not expected to be a problem this summer, citing added generation and transmission capacity in several regions, and less industrial demand as a result of economic conditions.

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