The growing gap between Canadian and U.S. gasoline prices is the biggest it’s ever been on record, according to a recent report from the National Bank of Canada.
The percentage of retail spending that Canadians put towards gasoline is above 13 per cent, close to an all-time high, while in the U.S. the percentage is just over 10 per cent.
The National Bank of Canada describes the high cost of gas as one of the “restraining” factors in the economy -- leaving less cash for Canadian households to spend on other items and contributing to a “soft” first quarter when it comes to overall retail sales.
“Note that the gasoline share in total retail spending was close to record highs in the first quarter, in sharp contrast to the declining share seen south of the border,” wrote the National Bank of Canada’s senior economist Krishen Rangasamy in a client note released on May 22.
Rangasamy also says the high cost of gas is acting as a “tax hike” on the consumer in the first quarter.
Earlier this week, BMO economist Sal Guatieri estimated Canadians are paying 30 per cent more for gas than Americans.
“Although U.S. gasoline prices have risen 10 per cent this year, they remain within the relatively narrow band established in the past three years,” Guatieri said, adding that “Canadian drivers haven’t been as lucky of late, no thanks to a weaker loonie.”
One of the reasons the National Bank of Canada cites for the growing price gap between Canada and the U.S. when it comes to gasoline, is that eastern Canadian refineries have been importing Brent oil – which is more expensive than U.S. blends such as West Texas Intermediate.
The report goes on to say that the National Energy Board’s approval of the reversal of Enbridge’s Line 9 pipeline – which would provide eastern Canadian refiners with Western Canada Select oil – should eventually result in cheaper gasoline and also reduce Canada’s oil imports.
Another restraining factor on the “soft” first quarter was the jobs market which has been “far from stellar.”
Below is a chart tracking gasoline and fuel oil, average retail prices by urban centre from April 2010 to April 2014.
