Why are Pump Prices Firming-Up While Crude Oil Markets Post Only Modest Gains?
Crude oil and gasoline markets can sometimes move in opposite directions because there are a number of factors that can affect pump prices, such as gasoline inventory levels, local supply/demand balances. Local market conditions can have a considerable impact on short-term wholesale prices of gasoline because it cannot be easily substituted when demand goes up, especially in the short term. These factors can sometimes work in conjunction with oil price changes but at other times they can mitigate or even reverse that impact. Canada has a dual market, with refiners in the West using domestic crude oil priced at West Texas Intermediate (WTI) parity, while refiners in Eastern Canada rely mostly on imports, which are priced against the North Sea Brent crude which is lighter and sweeter (less sulphur), and is the benchmark price for European markets and products. With the recent (and rapid) decline in crude oil prices, one of the main reasons consumers have not seen similar declines at the
