Price at the pump plummets

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Manitoba Historical Gas Price Charts Provided by GasBuddy.com

A break at the gas pumps could mean a boom at the cash register this Christmas.

On Wednesday, the price of a litre of regular gasoline in Winnipeg dropped below $1 — it was 99.8 cents at the Domo Gas Bar on Marion Street — for the first time in nearly four years. That’s down about 25 per cent from June, when the average price in the city was $1.32.7 a litre.

Industry analysts also say motorists aren’t likely to see any significant increase in prices until sometime in the new year, with one predicting they could even drop two more cents in the next week or so.

Depending on the type of vehicle they drive and how far they travel, that could mean significant savings for some families, said John McCallum, an economist with the University of Manitoba’s Asper School of Business.

For a two-car family that spends about $50 a week on gas for each vehicle, a 25 per cent drop in price translates into savings of about $25 per week, he said. Multiple that by six — the number of weeks between now and the end of the holiday season — and that’s an extra $150 to spend on holiday-related items. And if a two-vehicle family spends $100 per vehicle per week on gas, the savings would be about $300.

“So it’s good news first of all for the people themselves, but it’s also good news for the people who will be selling them the stuff they might want to spend it on, including retailers and service providers,” he added.

McCallum conceded some might opt to sock the money away or use it to pay down debt. But they’d be in the minority.

“If people behave as they have historically, they will spend at least two-thirds of it. And my guess is it will be a lot more than that,” he said. “And whether they spend it on Christmas or on other things… either way, it’s good for them and it’s good for the economy.”

The other great thing about it, McCallum added, is it’s like getting a pay hike and not having to pay any taxes on the extra money.

“You keep it all.”

Falling oil prices bad news for government

While lower oil and gas prices are good news for consumers and retailers, McCallum and Dan McTeague, senior petroleum analyst for GasBuddy.com, said there’s also a downside to plunging oil and gas prices.

McCallum said federal and provincial government royalties are based on crude-oil prices, and the price of West Texas Intermediate crude has plummeted to around US$75 a barrel from more than US$100 a barrel in June.

“So falling oil prices are terrible news for governments in oil-producing/oil-dependent countries” such as Canada, he added.

McTeague said low oil prices also tend to drive down the value of the Canadian dollar, put investment in new oil-exploration projects at risk, and heighten concerns about deflation and the negative impact could have on the Canadian economy.

East Winnipeg Domo the cheapest

Website GasBuddy.com stated the Domo outlet on Marion was the only one on Wednesday afternoon offering regular gas for less than $1. There were two Costco outlets selling it for 100.9 cents per litre, but most of the other stations listed were in the 104.4 to 106.4 range.

Domo Gas Corporation chairman Douglas Everett said the company’s Marion Street gas bar is its wholesale club outlet. Its prices are always a few cents a litre less than what its other outlets charge because it doesn’t offer twice-weekly five-cent-a-litre discounts.

Everett and company president Bruce Chwartacki said Domo’s other Winnipeg stations were charging between $1.03 and $1.06 cents a litre, depending on the competition in their area.

Expected to stay low for rest of 2014

Although gas prices have been falling in recent months, they said it’s difficult to predict what will happen next.

“It’s been really volatile the last couple of months,” Chwartacki said, noting the price gas stations pay for their gas can swing by as much as a couple of cents a litre on any given day. “So nobody really knows.”

Petroleum industry analysts, such as GasBuddy’s McTeague and Roger McKnight of Oshawa, Ont.,-based En-Pro International Inc. agreed it’s not easy predicting where oil and gas prices will go. Their best guess is they’ll stay at these low levels until at least the end of the year because world oil supplies continue to outpace the demand for oil, and there’s nothing to suggest that will change in the near term.

The world’s main oil producers also haven’t been willing to cut production to reverse the downward pressure on prices, so it will be interesting to see what OPEC (the Organization of Petroleum Exporting Countries) decides at its meeting next Thursday.

“I don’t know how much longer they can go on at these low prices…,” McKnight said, adding he wouldn’t be surprised to see prices skyrocket early in the new year.

murray.mcneill@freepress.mb.ca