As a result of the COVID-19 pandemic, gas prices around the world are at their lowest point in more than a decade.
Dan McTeague, the President of Canadians for Affordable Energy, says the cause of the price drop is a combination of a couple of things.
The first thing is an extreme drop in demand. More and more people are forced to stay at home to stop the spread of the virus, meaning less people are on the roads daily.
The second thing is the overabundance of oil. Countries like Russia and Saudi Arabia have not curbed their production, meaning the market is saturated, and producers are having to pay to store the excess oil.
McTeague says that despite some economies, like Saskatchewan, starting to reopen, gas prices will remain low for a while.
“Although we’re getting first signs here, led by Saskatchewan, that things are going to start to resume some degree of what was normal before the first week of March, I still think we’re a long way off,” said McTeague. “For that reason, I don’t expect gas to go crazy any time soon.”
He adds that while low gas prices may be good on people’s wallets, it’s not so good for Canada’s economy.
“It’s not a happy time,” said McTeague. “It’s a real deviation from what we consider normal, it’s for that reason that governments are going to very hard pressed to maintain financial stability in the days to come as more credit is needed to continue to pump the economy and get things back to normal, but that could be several years of adjustment.”
McTeague added that 10 percent of Canada’s exports are oil, so the crash in oil prices has hit us relatively hard.
He says that the length of time it will take for oil prices to bounce back is hard to predict, but it does rely on two factors.
“One, how many players will be eliminated, how many countries, or how many producers within those countries will actually go bankrupt and no longer produce oil,” said McTeague. “Second factor, which of course is not easy to predict, will be the strengths and the health of the global economy coming out of this.”
McTeague said if he had to guess, there will not be any major movement in gas prices until late June or early July
