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Low price of oil could lead to spike in car sales: analyst

LOWER MAINLAND (NEWS1130) – There’s an interesting new take on low oil prices, especially for those of us on the Lower Mainland, where spending more time in the car is discouraged.

Some analysts think the tumbling price could lead to more car sales in BC.

Carlos Gomes, a senior economist with Scotiabank, thinks next year, those new car sales will approach 200,000. “That will be the best performance since 2007.”

“The 2015 numbers will probably be the third-highest on record for British Columbia and up from about 180,000 last year.”

He notes this isn’t the first time they’ve seen this, adding the low price of crude boosts people’s purchasing power. “Canada tends to have at least a one per cent increase in sales when the price of oil declines significantly.”

Gomes believes the biggest jump in new car sales will be in Europe and the US, where more people are expected to buy small fuel-efficient vehicles.

“Purchases will also benefit from increases in household purchasing power, at a time when labour market conditions are on the upswing in North America and have started to advance year-over-year in Western Europe,” he adds.

But the plunging price of crude doesn’t mean gas prices will be dropping anytime soon. Gas analyst Michael Ervin says that’s because refiners don’t pay that lower crude price.

“The speculative outlook is for lower crude prices and when those actually do come to fruition in the form of real prices as they’re delivered to the refinery, then we’re likely see gasoline prices go down.”

“What’s being quoted in the press is the futures price, not today’s price. Gasoline prices aren’t going to react to futures price because refiners are paying that lower price based on what you’re hearing in the media,” explains Ervin.

This morning, OPEC, the largest group of oil-producing countries in the world, announced it wouldn’t scale back production to help stabilize international prices.

Drivers around the Lower Mainland are paying about $1.20 per litre right now, while the average price across Canada is nearly a dime lower.