$100 Oil + The Higher Loonie = Gas prices still cheaper in the U.S.?

Newspaper.jpgIf your eyes and ears work, you will no doubt know that the price of Oil has been on a tear of sorts for the last few years. I just saw on the news that Oil was $15/barrel as recently as 1999 – yet we touched $100/barrel during the trading day yesterday (Wednesday, January 2nd).

But there is more to this story than meets the eye. Last year, the price of gasoline at the pumps in Canada was in the low 90 cent range when Oil was trading in the $60 range. During the past weekend, gas was around $1.05, yet Oil is 85% higher in price.

But here is what really irks me: Gas is about 85 cents a litre in the States – and has basically maintained this 20 cent/litre beneficial spread over the last 2 years, even though our Loonie has appreciated by over 20%. Check it out for yourself at GasBuddy.com  You can convert from dollars per gallon to cents per litre and you can also play with the time ranges. For a real hoot – you can overlay the price of Oil on top of that as well.

Nonetheless – the "tipping point" of high oil prices has not yet been reached – personally, I define that as when you start seeing people who commute to work in SUV’s by themselves starting to carpool.

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Preet Banerjee
Preet Banerjee
...is an independent consultant to the financial services industry and a personal finance commentator. You can learn more about Preet at his personal website and you can click here to follow him on Twitter.
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  • Traciatim

    Just another, you can use google calculator to do similar transactions, for instance normall you can type something like:

    3 * 5

    in the google search bar and google will return an answer like:

    3 * 5 = 15

    You can use this to do complex calculations, for instance you can say things like:

    2.2 hectares in acres

    you’ll get back:

    2.2 hectares = 5.43631839 acres

    You can also go even more complex and do:

    3.15 USD per gallon in CAD per liter

    and get back:

    3.15 (U.S. dollars per US gallon) = 0.818411472 Canadian dollars per liter

  • Preet

    Thanks for the tip and Happy New Year Traciatim!

  • johnny pohoyhoy

    The rising price of oil is especially interesting if you subscribe to the "peak oil" theory. Basically the idea is that worldwide oil production has already peaked or will soon. This means shortages, spiking prices, and perhaps a prolonged global recession as we struggle to find cheap and plentiful alternatives over the next few decades (wind, solar, bio-ethanol etc don’t even come close). So, worst-case scenario: stock markets take a beating like we’ve never seen before. But, energy sector stocks should do better, and maybe even make a killing, since energy will still be in relatively high demand as supplies dwindle.Or, would the overall slowing of the economy drag these stocks down along with everything else?

    In other words, what do people think: would putting a chunk of money into energy sector ETF’s be a smart hedge?

  • Preet

    I spoke with the CEO of an Oil exploration company back in November who has been in the industry for 30+ years. We talked about Peak Oil and he made a very convincing argument that we are indeed AT Peak Oil now… In his words – the party is over – cheap oil is a thing of the past.

    Given that almost half of the world’s population is going through the growth stage that North America had decades ago – the global appetite for natural resources and infrastructure may be high for year and years to come. The ride will be bumpy though….