Oil and gas prices may never return to former levels, economists warn
Even as global oil prices dropped following the announcement of a ceasefire between the United States and Iran, local car sharing company Communauto announced Wednesday it will pass the increased cost of fuel to its customers.
A barrel of crude oil dropped to $95.36 on April 8 according to CNBC, down from $112.95 the day prior. But at gas pumps throughout Montreal on Wednesday, prices still hovered around $2 per litre. Starting Saturday, Communauto will add a two-cent surcharge per minute, a four-cent surcharge per kilometre and a 60-cent surcharge per hour, due to the hike in oil prices.
Economists warn that it could take months for gas prices to drop down, and may never be the same again.
“The truce, we don’t know if it will hold. We don’t know what will happen afterwards. We don’t know how quickly the various installations will be rebuilt. So there’s a lot of unknowns,” said Normand Mousseau, a physics professor at the Université de Montréal and scientific director of the Institut de l’énergie Trottier.
Mousseau added he doesn’t think the energy market will return to what it was six weeks ago until “probably before the fall, at least.”
“There’s a lot of tension in the Middle East, there’s many installations that have been destroyed. So I think that will keep the pressure on the oil markets.”
In late February, the price of gas in Montreal was $1.48 per litre on average before the U.S. and Israel launched attacks on Iran.
Economist David Gray from the University of Ottawa said “it would take a number of months for gasoline prices to go down, and it’s possible that the price of crude oil will never return to its levels before.”
“Now, everyone realizes how fragile the supply chain is, and that adds a risk factor. That adds a risk premium for those who sell the crude oil, and that risk premium just raises the price,” Gray said in an interview.
None of the petroleum sold at Montreal gas stations comes from the Middle East, according to Mousseau. “It comes from Canada and the U.S.,” he explained.
Even though Canada has its own oil and gas industry, Mousseau said that doesn’t make it immune to global market shock, because oil is an “international commodity.”
“All the oil at the refinery in Montreal comes from Canada, Alberta, and some of it goes to Quebec City, and the rest in Quebec City and Lévis,” and much of it gets refined in the United States, he explained.
Mousseau explained that because oil is an international commodity, “prices are set” in a worldwide market.
“While the government has been moving back on electrification, even if we are an energy superpower, we don’t have control on energy prices, oil and gas prices. So we have to suffer like everybody else,” he said.
Editor’s Picks
The post Oil and gas prices may never return to former levels, economists warn appeared first on Montreal Gazette.