Russia’s war in Ukraine has pushed gas prices to record levels as Canada and other countries impose sanctions on Russian oil. One expert said it could be a while before we see the pumps ease off.
“There’s no question that the price of gasoline is ultimately tied to the price of oil. And right now, I think the message to motorists is that we should get used to the triple-digit price of oil.” he said. former chief economist Jeff Rubin of CIBC World Markets in an interview with CTV’s Your Morning on Friday.
Before the Russian invasion, oil prices had been rising steadily since November 2021, after falling earlier due to the rise of the Omicron variant of COVID-19. Brent crude oil prices peaked around $128 a barrel on Tuesday before falling to $111 the next day. As of Friday, the price sits at around $108.
GasWizard.ca, gas prices fell Friday by as much as 15 cents per liter in the Greater Toronto Area, Montreal and Vancouver, according to GasWizard.ca. But Rubin does not believe that gas prices will “physically go down” unless there is new supply in the market.
“There’s really no new supply. OPEC doesn’t have any spare capacity. And in fact, they’re producing about a million bpd less than they promised,” he said.
This was made worse when Canada, the US and the UK moved to ban imports of Russian fossil fuels. Russian production accounts for 7% of the world oil market, and the country exports 7 million barrels per day.
“If we lose 7 million bpd of Russian exports, oil prices could go significantly higher. I mean, they could set new record highs,” said Rubin.
He added: “Will we lose all 7 million bpd, because while some countries boycott Russian oil, other countries like China and India could also increase their appetite for oil,” he added. want for that product”.
American officials have been negotiating with oil-rich Venezuela, despite their adversarial relationship, in an attempt to fill the void left by the loss of Russian oil. But Rubin said Canada and the US could also boost domestic production.
“Ironically, the two places in the world where you can increase oil production are Canada and the United States, I say sarcastically, because the governments of those countries see the oil and gas sector as their royal industry. wiser marriage and policy, more concerned with subsidizing wind and solar than promoting new production,” he said.
US President Joe Biden could reverse his administration’s revocation of the Keystone XL Pipeline license, Rubin suggested. Alberta Premier Jason Kenney has also called on the Biden Administration project revival.
“That would not only increase the amount of oil at US refineries but also allow increased production in the oil sands in Alberta,” said Rubin.
But the Biden Administration rejected these calls and said the proposed pipeline would help increase supply very little.
“Keystone isn’t an oil field – it’s a pipeline. Also, oil is continuing to flow in, just by other means. So it really won’t have anything to do with a source imbalance. present,” White House Press Secretary Jen Psaki told reporters at a news conference on Tuesday.
Even if the US and Canada increase production, it could take another 12 to 18 months for a tangible impact on oil prices. Rubin says the other policy solution would be to temporarily cut the gas tax, which the government of Alberta has already done.
“It’s going to take some time. This isn’t a problem that’s going to go away overnight. And it’s an issue that, if it’s not addressed now, you could see much higher prices,” said Rubin. speak.