Get ready for pain at the pumps — gas prices expected to rise and stay high as Saudi attack rocks oil world
It will be a few days before gas prices in Calgary are affected by Saturday’s attacks on Saudi Arabian oil infrastructure, according to an energy analyst.
But the increase at local pumps, expected Wednesday, shouldn’t break the bank, said Dan McTeague.
Drone attacks on two major oil installations in Saudi Arabia damaged the processing facilities responsible for the majority of the country’s crude output, which will have a wide impact on the global energy industry. The loss is so severe, oil and gas prices had already started to rise Sunday on global markets.
However, McTeague said the jolt in prices might not shock Canadian drivers when they go to fuel up.
“It just so happened on the same day that prices for gasoline may be heading up, we also move into winter-blend gasoline, which starts Sept. 15. It’s usually good for a three- or four-cent decrease. So if I see prices going up five cents a litre, you may see them drop three or four cents,” said McTeague.
Though it may only be a small increase, McTeague expects gas prices to remain higher than usual in the unstable market.
An estimated three to six per cent of the global oil supply was lost as a result of the bombings in Saudi Arabia. If international tensions escalate, “the sky is the limit” for oil prices, according to McTeague, with all eyes on the price of benchmark crude when North American markets open Monday.
He added that since a large majority of Saudi oil is destined for Europe and Asia, the Asian market showed nervousness late Sunday in increasing prices by $5 to $10 a barrel. North America hasn’t appeared as spooked, but U.S. President Donald Trump wrote on Twitter on Sunday night that his country would tap into oil from its strategic petroleum reserve, if necessary.
McTeague said delays for a new energy pipeline in Canada makes the country vulnerable to these types of “international shocks.”
In a written statement, Alberta Energy said the events in the Middle East demonstrate why oil and gas from “politically stable sources such as Canada” is important.
“With the third-largest oil reserves, Canada can do much to supplant high-risk sources overseas. But our country actually needs to build pipelines to help supply a world economy hungry for reliable sources of energy,” said the statement.
Robert Skinner, executive fellow with the University of Calgary’s School of Public Policy, said the immediate effects on Alberta’s energy industry might be positive but the long-term implications could hurt the province.
“It will reinforce among Albertans in general and the political leaders in particular that they can continue to rely on oil revenues and one more oil boom, rather than face the realities of the fiscal situation in this province,” said Skinner.
He added that the province needs to quit relying on oil revenues and work to diversify the economy.
“When the price goes up, that’s good for the province’s industry, but to rest your future on other people’s disasters is not exactly a good strategy,” said Skinner.
This is the first time in the history of the oil market that a major player has been hit in this way, so the world is in “new territory,” according to Skinner.
Predictions on how long the market will be affected by the attacks don’t have a precedent, he added.