A gloomy forecast for diesel prices as strong demand expected through 2022

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Across Canada, we are seeing sky-high diesel prices, with some provinces inching closer to $2 per litre, where other provinces are closing in on $3 per litre, is there light at the end of the tunnel? According to experts, if there is, it’s not coming anytime soon.

The market has seen a surge in demand over the past year as the economy rebounds post-COVID; this coupled with inadequate oil supply, and reduced refining capacity, we are in a perfect storm causing the spike in prices at the pumps. One may theorize that because the prices are so high, it would curb consumer spending on diesel, however, this isn’t the case at all. Not only are diesel-fuelled passenger vehicles putting on the miles — or kilometres — diesel, unlike gasoline, is in many cases a non-negotiable. It’s not just used for leisure activities like going on a road trip — it is used to fuel the machinery that puts food on the table, quite literally.

Because of this certainty in usage, whether it’s for farming, ranching, construction, transportation, or any number of other industries that are reliant on the fuel, it is highly unlikely that we will see a decline in demand, at least over the next year.

All of this is according to Patrick De Haan, oil and refined products analyst with GasBuddy.

De Haan talks about the pent up demand felt throughout North America as we flirt with the other side of COVID-19 and the supply that simply isn’t there to support it.

“Just ahead of COVID, the US had about 19 million barrels a day of refining capacity, we’re now down to about 17.8. And that is part of the problem as well, as not only oil supply is not keeping up with global demand. When it comes to refining capacity, there’s just not enough of it right now to produce as many products as we need.”

However, it’s not just the reduced oil supply and refining capacity that is creating the supply-demand imbalance. Sanctions that have been imposed onto Russia from numerous countries has those same countries looking for products that they once got from Russia, from another source. This of course includes diesel. With a large portion of European vehicles being powered by diesel, they have turned to North America to fill this demand, which is adding to the pinch felt here at home.

As of the first week of May 2022, according to GasBuddy.com, diesel prices across the country vary greatly.

Province by province, here are what Canadians are paying, on average, for diesel at the pumps:

  • British Columbia: $1.999/L
  • Alberta: $1.629/L – $1.749/L
  • Saskatchewan: $1.859/L
  • Manitoba: $1.929/L
  • Ontario: $1.899/L – $2.099/L
  • Quebec: $2.099/L – $2.399/L
  • Newfoundland and Labrador: $2.756/L
  • Prince Edward Island: $2.599/L
  • New Brunswick: $2.127/L – 2.558/L
  • Nova Scotia: $2.481/L

De Haan says the swing in prices throughout the provinces is a direct correlation of that regions specific balance of supply and demand. Although it may be tempting to be frustrated at the pump or till, De Haan shares that the retailers, or any middleman in this situation, are the ones who are being squeezed the most right now. Refineries and upstream to the oil producers, are the ones who are more significantly feeling the benefits of the current landscape of the diesel market.

Check out the full conversation between De Haan, and RealAg Radio host Shaun Haney, below:

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