A happy shock at the pump: gas prices take another overnight drop

Gasoline prices in Canada are at their lowest level in nearly three years, falling well below $1 per litre in many parts of the country, but observers say the latest price drop should not be an excuse for drivers to abandon their fuel-saving behaviour.

The national average for gasoline was at about 98.3 cents per litre on Tuesday, according to price-tracking website Gasbuddy.com. Prices in some some competitive markets, including the Toronto area in southern Ontario, fell up to six cents to around 85 cents a litre Tuesday.

The last time gas was that cheap nationally in February 2006, said Gasbuddy co-founder Jason Toews.

He said the biggest factor is the steep drop in crude oil, the main ingredient in gasoline, finally working its way into the pump price.

Light, sweet crude for December delivery rose $6.82 to US$70.73 a barrel on the New York Mercantile Exchange on Tuesday – a big rebound from the US$60 level it hit in recent days, but still less than half of its record high of US$147 reached in July.

Toews said it takes a few months for the impact of lower crude prices to be reflected in gas prices. Crude costs usually make up just under half the cost of refining gasoline, with government taxes making up most of the rest.

“We’re going to see prices continue to decrease,” he said.

Another major factor is the decrease in demand that has come from a slowing global economy.

“Any time people have less money to spend they tend to travel less and if you’re out of a job, you probably don’t commute every day.”

During the summer, when gas prices soared above $1.40 per litre, it would have cost about C$85 to fill up a 60 litre tank of an SUV. At Tuesday’s average, it would cost less than $60. In Toronto, a fillup on an empty tank would cost about $51.

With fuel costs taking a smaller slice out of household incomes now, many consumers will have more purchasing power, which could have positive ripple effects into the wider economy.

Scott Wilson of the Alberta Motor Association is urging motorists to keep up the fuel-saving behaviours they learned over the summer.

“It’s a good idea to think about fuel efficiency all year round, not just when the price of gas is high, because you can save yourself money both times. It doesn’t matter where the price of fuel is, you can always save yourself some money,” he said.

Wilson said demand for gasoline tends to ramp down as the weather cools, which leads to lower prices.

But he said “you can set your watch by” an increase in gas prices next spring, when the summer driving season kicks in once again.

“The behaviours that they practice and hopefully used on a regular basis this past summer will be very valuable when the next summer rolls around and the price of fuel increases again,” he said.

The 98-cent national average is down from an average of $1.20 a litre a month ago and even below the average a year ago of about $1.01, according to GasBuddy.com.

A litre of regular gas cost as little as 84 cents in Canada’s most populous city, dropping in the Toronto area from above 90 cents Monday at some locations.

In other cities across Canada, a litre of gas was going for as low as 91 cents in Montreal, 95 cents in Nova Scotia and $1.05 in Newfoundland.

In Western Canada, GasBuddy.com said average prices per litre ranged from 95 cents in Calgary to $1 in Regina and Saskatoon, 99 cents in Winmipeg and $1.07 in Vancouver and Victoria.