What's happening with the price at the pumps
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- Published on Thursday, July 23, 2015
By Neils Mack
The Neepawa Banner
There has been some talk of more fluctuating oil prices recently. There are a few different fronts coming together causing some change in the market price of a barrel of crude.
The first major factor is a nuclear deal between the United Nations and Iran. This has ended UN sanctions on oil coming from Iran. The trickle down effect to us here is that when Iran gets their infrastructure back online, they can export massive amounts of oil to North America, helping to drive down the price.
While Canadian oil production continues, it is on much shakier ground that it was a year ago. OPEC continues to export more oil than in previous years, which continues this vulnerability within the Canadian energy industry.
The recent changing of provincial government in Alberta is becoming a factor too. The newly elected NDP government plans to increase carbon fees and toughen its environmental strategy. This is unwanted pressure for industries that are over-stretched as it is.
Middle Eastern oil is much cheaper to extract from the ground and refine, so it can be sold for significantly less than Canadian oil and still be profitable. The introduction of the Iranian oil reserves threatens to drop prices even more. In fact, it is responsible for the small drop in prices at the pump here in Neepawa last week.
The second front pressuring the market price of oil is the financial crisis in Greece. While Greece itself isn’t a major producer or consumer of oil – and can’t directly sway the price, the spillover from this crisis will have two different effects on oil.
The first is that this instability is causing a general lack of confidence in the market, this may press oil prices down slightly.
The second spin-off comes from the damage done to the value of the Euro. As its value drops, the comparative stability of the US dollar will help it do well. Since oil is priced per barrel in USD, this makes oil more expensive. This is probably why gas prices jumped up again earlier this week.
The general outlook is that the price of gas will continue to stay low for the foreseeable future. This means that for the remainder of summer and start of winter, gas prices shouldn’t have any unexpected jumps, barring some political meltdown.
This does come as bad news to those in the Canadian oil industry, it doesn’t look like there will be any gain in stability for some time.
