Torontonians can expect to pay a premium on their energy bills this winter as prices for North American fuel, natural gas and coal reach heights not seen in years.
Dan McTeague, president of Canadians for Affordable Energy, projects that gasoline prices at Greater Toronto Area pumps will hit $1.50 per litre in the coming weeks, up 44 per cent from a year ago.
That would be the highest price point for auto fuel anywhere in Ontario since the summer of 2014, when a litre sold for $1.43.
And unlike price surges in recent years, experts say this one could last longer than a few weeks.
“I would anticipate some pretty big increases in what consumers pay this winter, if we’re seeing prices stay around these current levels,” said Douglas Porter, chief economist at BMO.
What’s driving the surge in prices?
The global energy system has been plunged into crisis in recent months as the cost of natural gas, oil and coal climbs rapidly. A combination of increased economic activity, the loosening of COVID-19 restrictions and colder weather has sparked a surge in demand in North America while supply levels are down.
Meanwhile, stored Canadian natural gas is at a five-year low, as North American LNG (liquid natural gas) exports — scrambling to keep up with global demand — have drained local inventories.
North American energy producers, remembering the price crash early in the pandemic, have been reluctant to boost production to levels that could bring down prices.
In China and the U.K., fuel shortages have prompted panic buying and long lines at filling stations.
The price hikes in North America are relatively tame compared to the energy crisis in Europe and Asia, where countries phasing out coal experienced a lousy year for wind production and Russia decreased its much-coveted supply to the continent.
But global turmoil in the energy markets will have local repercussions, experts say.
“It’s a bunch of bad luck at the same time,” said Rory Johnston, market economist at Price Street Inc.
“The long winters in Europe and Asia, plus a blisteringly hot summer in North America all contributed to a massive increase in demand for natural gas demand. So we’re already going into the colder seasons relatively low on natural gas to begin with. Add to that all the effects the pandemic has had on the economy, plus Russia’s lowered gas supply, and you have markets going haywire.”
The benchmark American oil price jumped nearly three per cent this week, to about $78 a barrel, a seven-year high, after the Organization of the Petroleum Exporting Companies cartel declined to increase its supply.
Enbridge Gas, which heats over 75 per cent of homes in the province, increased its rates on Oct. 1. The typical customer who buys natural gas will now see an annual bill increase ranging from $57 to $81 per year depending on where they live, the company said in a statement.
The Ontario Energy Board, which regulates energy pricing in the province, says the Enbridge rate hike is associated with upward pressure on North American natural gas prices “due to higher than forecast demand in North America.”
The board also attributed the rise to a decrease in production and supply interruptions related to Hurricane Ida, which hit the U.S. last month.
“We’re not going to see price hikes anywhere close to what we’re reading about in place like Europe and Asia, but that’s not to say we’re going to be fully spared either,” said Porter.