‘This is devastating’: why economists worry low gas prices will hurt Canadian economy
Published Monday, November 26, 2018 4:11PM EST
Last Updated Monday, November 26, 2018 6:33PM EST
Ottawa drivers are getting an early Christmas gift at the pumps. Gas prices in Ottawa have dropped significantly in the last few days, well below a dollar a litre, putting more money in the pockets of drivers.
“It will probably save me ten-bucks today,” says Gatineau resident Steve Milley who decided to fill up at the Esso on Montreal road in Ottawa after seeing the price of regular gas at 98.9-cents/litre, “that’s going to buy me a coffee and donut. I’m happy.”
There is a glut of oil on the market. In Canada, Alberta oil is cheap but the problem is no one is buying it, because of the lack of pipelines; producers are having trouble getting it to market. Industry insiders say the abundance of oil contributing to the sudden drop in gas prices.
“This came as quite a surprise,” says GasBuddy.com Senior Petroleum Analyst Dan McTeague, “it could mean as much as $20 a week in savings for drivers as we head into the Christmas period.”
McTeague says he has never seen such a dramatic drop in prices, less than three weeks, and worries of the implications, “it’s good for consumers but for the economy as a whole we’re going to take a beating.”
It’s estimated the low gas prices could cost the Canadian economy up to $50-million dollars a day in lost revenue and taxes.
“That’s why the depressed oil prices are hurting us. This is absolutely devastating for Alberta,” says Ottawa Economist Ian Lee, “it reduces revenues to the government of Canada and the government of Alberta and these are revenues that are spent on services provided to Canadians.”
Lee says, add to that the announced closure of the Oshawa General Motors plant, and he says it’s a bad day for Canada’s economy, “we can’t rely on the manufacturing industry, we can’t rely on oil and gas, well what can we rely on to maintain our standard of living?”
Drivers like Milley are taking the break while they can get it, “it’s about time,” he says.
McTeague predicts the low prices will last into 2019.