High gas prices driven up by pandemic leads to supply and demand issue

With a slight relief at the pumps expected ahead of the Victoria Day long weekend, experts don’t anticipate gas price to continue dropping long-term.

Ontario gas prices are set to go down 10 cents per litre on Friday, following a three cent drop Thursday.

“The volatility is the only thing that's constant,” said Patrick De Haan, head of petroleum analysis at GasBuddy.

“Not only is oil up because of the imbalance between supply and demand, but there's not enough refining capacity now to turn that oil into things like gasoline, diesel and jet fuel and that's pushed the price of gasoline up considerably.”

De Haan said several factors come into play when fuel prices are decided, as more people resume regular post-pandemic activities.

“This is the effect of a major life-changing event in which consumer behavior changed significantly and only now are we starting to return to some of those norms. Only now are a lot of the speed bumps starting to get reduced,” De Haan said.

“Not only that, but we've lost several refineries in North America, some of which due to poor economics, COVID, Hurricane Ida, fires, that has cut the refining capacity — at least in the U.S. by half a dozen or so.”

De Haan explained, “from trucker shortages to commodities to all sorts of things. It wasn't just oil seeing an explosion of price, the housing market has exploded because of so many of the imbalances.”

De Haan believes oil producers have been unable to keep up with demand since production slowed during the COVID-19 pandemic.

“I think they wanted to make sure that things were returning to normal, demand starting to go up. The global glut of crude oil drained very quickly as a result of the imbalance between supply and demand,” he said.

“And now because of Russia's incursion into Ukraine and how the West has responded with sanctions, we have more of the oil that's not reaching the global market. So supply is pressured because it's much lower than demand. And that has pushed prices up.”