Gas prices are rising even as oil prices are falling. Which give?

In recent weeks, Canadians have been dealing with escalating costs at the pump, with average national gasoline prices nearing $2 per liter and likely to rise as the long Victoria Day weekend. Yet the story of oil prices has been the opposite, creating a maddening disconnect for consumers. If oil prices go down, why don’t gas prices go down too?


Oil prices and gasoline prices disconnect

National Average Gas Price

Regular gasoline price, $/litre

the globe and the mail, Source: Natural Resources

Canada, United States ea

Oil prices and gasoline prices disconnect

National Average Gas Price

Regular gasoline price, $/litre

the globe and the mail, Source: Natural Resources

Canada, United States ea

Oil prices and gasoline prices disconnect

National Average Gas Price

Regular gasoline price, $/litre

the globe and mail, Source: Natural Resources Canada, US eia

Crude price were weighed down by growing fears of a recession, COVID-19 lockdowns in China and the release of oil from strategic reserves by a number of countries. It’s not just gasoline prices that have broken away from this trend. All types of refined petroleum products for transportation are up sharply, including diesel for trucking and jet fuel for the airline industry.

While refined fuels and crude generally move in sync with each other, the widening gap, known as the “crack spread,” is due to several factors that are not about to resolve any time soon. .

On the one hand, demand for gasoline, jet fuel and diesel has increased as economies reopen, people start to travel again and the trucking industry rushes to unclog supply chains. The increase in fuel consumption has outstripped refineries’ ability to keep pace. An economic downturn would dampen this demand, but so far there is no evidence that people are reducing their fuel consumption.

Supply issues are exacerbated by the fact that refining capacity has collapsed during the pandemic as factories closed. Capacity in the United States was down 5.5% from February 2020, compared to its 2014 level, according to the US Energy Information Administration.

To mix together in Moscow’s invasion of Ukraine and the resulting disruption of oil and diesel exports from Russia to Europe and the result is increased margins for refineries that buy crude and turn it into fuel. This has sent refining company stocks soaring, with the S&P 500 Refining and Marketing Index up 43% this year, even as the broader market is down 18%.

When it comes to the disconnect between crude and gasoline, drivers’ pain is refiners’ gain.

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Steve R. Hansen