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Jump in gas prices would be unreasonable, even as Saudi oil facility recovers: expert

Last Updated Sep 17, 2019 at 12:14 pm PST

FILE - Motorists fuel up vehicles at a gas station in Vancouver, B.C., on Sunday April 22, 2018. THE CANADIAN PRESS/Darryl Dyck

Economist Werner Antweiler says Saudi Arabia and North America have significant reserves of oil

He believes any spike in oil prices should be short-lived, assuming the situation in Saudi Arabia does not escalate

VANCOUVER (NEWS 1130) – While there are projections local gas prices could jump as much as seven cents per litre by Wednesday, one expert believes that would be unreasonable.

Some analysts are expressing fear about what a recent attack on a Saudi Arabia oil facility will mean for what Canadians pay to fill up.

But based on the numbers economist Werner Antweiler with the Sauder School of Business has looked at, anything above a three cent per litre increase couldn’t be justified.

RELATED: Oil prices drop ahead of update on Saudi oil production

“It will take some time to repair the facility, but meanwhile we have quite a lot of reserves and even Saudi Arabia actually has oil already in storage to meet the shipments for the next month,” Antweiler says.

A weekend attack on a key Saudi Arabia energy facility led to the biggest disruption of crude oil in modern history. In the U.S., auto club AAA warned of a potential 25-cent increase in the price of gasoline.

Antweiler acknowledges it will take time to repair the facility, but there are significant oil reserves in Saudi Arabia, and in North America as well.

“The data points to a record level of oil that is stored as reserves right now, so markets can actually react much more gradually to what’s going on.”

RELATED: Gas prices around Metro Vancouver now expected to spike even higher: analyst

And that factors into his analysis of how things will change at the pump. Antweiler says if gas station operators feel they have an opportunity to beat competitors on price, they will.

“There may be overreaction on the market, maybe there is some opportunity that people see to have an explanation for raising prices, but I have, also, little doubt that there is competitive pressure to actually bring the prices in line with the fundamentals. So these distortions actually don’t last very long.”

Antweiler says if Canadians do see a spike, they shouldn’t panic. It will likely be short-lived, assuming the situation in Saudi Arabia doesn’t escalate further.