The Canadian economy is going through some drastic changes with the rapid spread of the coronavirus, including a dramatic drop in gas prices.
Simultaneously, as the virus causes more people to self-isolate resulting in fewer folks driving and purchasing gas, an oil-price war underway between Saudi Arabia and Russia has intensified the drop in prices.
Patrick DeHaan, a petroleum analyst at GasBuddy, explained what’s going on with the low gas prices in a Facebook live video earlier this week.
“It [coronavirus] keeps people, like myself here, locked in their houses or it should, and that’s caused oil demand to plummet. Oil demand is very much lower than it was even in the weeks past, and when oil demand goes down, prices go down,” he said.
Oil comes from the ground and is then refined which is the process of purifying it, to create products such as gasoline, diesel fuel, jet fuel and more. So, when the price of oil is constantly changing, that’s why gas does the same.
However, “the demand for oil has dropped tremendously week-over-week, while supply remains high. There is a big imbalance between supply (high) and demand (low),” wrote a GasBuddy blog from March 17.
This imbalance was partially caused when Saudi Arabia, Russia and other Organization of Petroleum Exporting Countries (OPEC), held a meeting regarding production cuts and an agreement could not be reached. This resulted in both countries starting an oil-price war and significantly increasing their oil production.
The meeting for reduced oil production in the first place was organized because of the recent outbreak of COVID-19.
“The coronavirus has caused countries to be in lockdown, limiting driving, flying and overall movement in order to contain the spread. This means very little need for oil,” explained the blog.
Lillian Pottruff-Stone, a gas station employee in Hamilton, said during the price war in February her location had triple the number of customers and triple the amount of cash circulating during her shifts.
“My location has been slower now that the virus has hit but not by much.”
She also says her employer has taken few precautions in regard to the coronavirus, and she hopes they take further action soon.
“At my station there are no extra cleaning things happening or any precautions really… it’s just business as usual.
“The only thing they did was close off our washroom to the general public. We still accept cash and other payments,” she said.
Stone also said she was on hold with the Telehealth hotline recently due to concerns from so much human and cash interaction at work to insure she is not a virus carrier.
In March of 2019, gas in Kitchener was approximately 106.4 cents per litre, compared to 73.9 cents per litre now, which is a huge 32.5 cent difference.
“So long as the coronavirus situation is bad, as long as we are all in lockdown, gas prices will probably remain low, because remember this all has to do with low demand,” said DeHaan.