What’s leading to the sudden price drop at the pumps?

“The power was only cut for a couple hours, but that can obviously produce a multi-hour shutdown. So that was the story back in early September, but the same refinery also had other issues with one of its units within the last, well, about two or three weeks ago, which contributed then to another jump in prices. But all of that looks now to be addressed and as a result, we’re finally starting to see some more meaningful improvement.”

The earliest adopters of the new prices are as low as $1.49 in a few places around the province including Regina, Prince Albert, Moose Jaw, Shaunavon, and Lumsden just to name a few.

Other stations are still waiting to drop their prices in hopes they don’t take a loss on the expensive fuel they bought. De Haan said that if people stick with the stations priced lower, or wait to fuel up for potential further price drops, it will force the hand of the higher priced stations to follow suit.

“Stations are going to essentially be forced by competition to lower their prices unless they don’t want to sell any of it. This is just what’s hard about operating a station is if you did pay more for that fuel and your competitors are lowering their prices soon, you may have a drastically higher price and nobody to buy that fuel. So even if gas stations bought at a higher price, eventually they’ll have to lower the prices to remain competitive with other stations nearby.”

Diesel prices in the province are also starting to see some price reductions, but a bigger drop is dependent on the earlier mentioned discussions between the US and Iran. The results of the US midterms may also add pressure to lower diesel prices, but it’s still a less clear picture compared to the gas prices.

“President Trump had suggested that he was going to work on the problem more actively after the US midterms. Of course, in the States, voters delivered a very significant rebuke of the war in Iran, and that may put political pressure on the US to improve the situation given the outcome of the US election. So there will likely be continued improvement in diesel, but keep in mind with diesel inventories rather tight, diesel prices may decline, but it’s going to be very much subject to the potential of that deal.”

For farmers looking ahead to book their fuel supplies for the spring seeding season, De Haan said that holding off while these discussions are going on could be beneficial.

“If you’re a farmer, if you don’t need diesel for the next few months, if you’ve run through your supply, it may be advantageous to wait.” De Haan added, “If a deal doesn’t happen, if there’s new escalations, diesel prices could go up, or if there is a deal prices could go down and it’s all about if there’s going to be a deal to reopen the straight. And obviously that, absolutely unpredictable.”

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nick.nielsen@pattisonmedia.com

by Nick Nielsen

What’s leading to the sudden price drop at the pumps?

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