Here’s Exactly Why Gasoline Prices Are Going Crazy

It’s official: we’ve broken another national record. This week, the average weekly price of retail gas hit an all-time high …

Burning gas and electric cooker rings

Image source: Getty Images

It’s official: we’ve broken another national record.

This week, the average weekly price of retail gas hit an all-time high of $1.45 per litre. That’s around $.40 more than it was this time last year, and $.10 to $.20 more than it was just this past summer.

That last fact has left many Canadians scratching their heads. Under normal circumstances, gas prices fall in the winter (when we all hibernate) and rise in the summer (when we take vacations). But this year is far from normal. What’s going on with retail gas? Let’s take a deeper dive.

The short answer: Crude oil

Though many factors influence the price of retail gas, perhaps none impacts it so much as crude oil. And, right now, the world is facing a crude oil shortage.

Recall that, last year, crude oil providers were in a bit of a bind. The world was closing up, and, in the midst of travel bans and lockdowns, many countries simply didn’t need crude oil. Consumers weren’t driving, factories weren’t operating, and commercial flights were little more than a thing of the past. The demand for crude oil was so low, in fact, that oil providers were practically giving barrels away, with the price dipping below zero for the first time on record.

In order to limit lost revenues, OPEC+ decided to cut daily output in April 2020 by an astonishing 10 million barrels a day. Since then, OPEC+ hasn’t revamped its oil production to pre-pandemic levels, despite the fact that demand for oil is growing more and more.

Why doesn’t OPEC+ just make more oil?

That’s the question many politicians, from the United States to India, even to Canada, are asking right now. OPEC+’s answer? It’s not a wise business move.

Fearing that the pandemic isn’t quite over just yet, OPEC+ is taking a gradual approach to introducing more crude oil to the world. In November of this year, OPEC+ plans to add 400,000 barrels of crude oil per day. That may seem like a lot, but in actual fact, it’s very little. Canada alone consumed around 2.5 million barrels of crude oil per day pre-pandemic, and the United States, the world’s largest consumer of crude oil, consumes around 20 million daily.

Though many countries are pressuring OPEC+ to reconsider their plans, they’re not budging. And, unless they do, we could be in for a very expensive winter.

What can you do?

Well, for one, you may as well get used to higher gas prices. At least for now. From the looks of it, gas prices will continue to rise at least until the end of the year, possibly into next year, too. I would start moving some expenses around in your budget, especially if you drive a car or truck that consumes a lot of gas.

At a more practical level, you could practice fuel-efficient driving habits. Driving slower, for instance, in-vehicle that’s properly maintained (oil changes, clean air filter, tires at the right level) could help you save a few liters here and there, while carpooling and limiting how much you drive could help you save even more. Now might be a good time to download apps, such as GasBuddy, which will tell you where you can find the cheapest gas in your area.

If you haven’t already, I’d also look at some of Canada’s best rewards credit cards and cashback cards. If you can’t beat rising gas prices, you may as well profit from them. Certain rewards cards will give you more cashback for gas purchases, which could help you in the long run, especially if gas gets more expensive.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Personal Finance

woman retiree on computer
Investing

Retirees: Here’s How to Boost Your CPP Pension

Retirement planning is best done when considering not only your CPP pension, but also your investments in income-producing stocks like…

Read more »

Female hand holding piggy bank. Save money and financial investment
Personal Finance

Here’s Why a Big Emergency Fund Is a Terrible, Terrible Idea

Here's why saving more than six months' worth of expenses can be disadvantageous to your household.

Read more »

cup of cappuccino with a sad face
Personal Finance

5 Super-Simple Ways to Completely Ruin Your Credit Score

Building your credit score takes time, dedication, and smart decisions. Tearing your credit score apart — well, you could do…

Read more »

Young woman sat at laptop by a window
Personal Finance

5 High-Paying Side Hustles That Could Help You Save for Retirement in 2022

If you're struggling to save for retirement, here are five side gigs that could give your retirement fund a boost.

Read more »

Hour glass and calendar concept for time slipping away for important appointment date, schedule and deadline
Personal Finance

The Tax Deadline Is Almost Here! Here Are 5 Things You Need to Know if You Haven’t Filed Yet

The deadline to file your taxes is May 2. If you haven't started yet, here's what you should know.

Read more »

consider the options
Personal Finance

New to Investing? Be Sure You Avoid These 5 Newbie Mistakes

If you're new to investing, here are five big mistakes you should watch out for.

Read more »

Couple relaxing on a beach in front of a sunset
Personal Finance

Lazy Canadians: Here’s How You Can Make $200 Per Week in Passive Income

To earn $200 a week, invest money in high-quality stocks or ETFs.

Read more »

gas station, convenience store, gas pumps
Personal Finance

Costco vs. Canadian Tire: Which Rewards Card Will Save You More on Gas in 2022?

The CIBC Costco Mastercard earns 3% back at Costco Gas, and the Canadian Tire Mastercard earns 10 cents per litre.…

Read more »