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A gas price analyst said the recent hike at the pumps is tied to Canada not selling enough of its resources to a needy world market.
Dan McTeague, the president of Canadians for Affordable Energy, also told Gormley on Wednesday that Western Canada follows market trends set by the Chicago spot market.
“To put that in perspective, back a couple Sundays ago on the 26th of February, we saw wholesale prices (for fuel) on the markets for about $2.28 a gallon up until — well, pretty much until (Tuesday),” McTeague said.
“They were in the 2.71 (dollar-per-)gallon range. So you can see where things had gone up about 40 cents a gallon, good enough for about a 10- (or) 11-cent increase (per litre at the pumps). And that’s exactly why prices popped.”
McTeague said gas retailers couldn’t hold on to much of their gasoline since they had to purchase it at higher rates in the first place. He said that eventually caused a price spike.
He also mentioned there’s a disconnect between physical gas traders and hedge funds and money managers.
“(Hedge funds and money managers) have nothing to do with the actual commodity, but they can sure make the price go up and down regardless of reality,” McTeague said.
The Bank of Canada announced Wednesday it would hold its current interest rate at 4.5 per cent. But Jerome Powell, chair of the U.S. Federal Reserve, indicated Tuesday that further rate hikes might be on the way amid a strong labour market.
That move could have huge consequences for the Canadian economy, according to McTeague.
“If the United States surges ahead with another interest rate increase and Canada stays idle because it knows (rate increases will) force a recession, you’re going to see a massive and greater devaluation of the Canadian dollar,” said McTeague, who noted the commodities we consume in Canada are priced in U.S. dollars.
“So a move by the U.S. Fed to raise interest rates will have a more damaging effect on Canadians in ways that they can’t imagine.”
The Canadian dollar fell to a four-month low against the American dollar on Wednesday, trading at 72.46 cents US — the weakest level since early November. When the markets closed, the loonie was up to 72.54 cents US.
— With files from The Canadian Press