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Record-high gas prices strike Montreal: a new reality for drivers

Some Concordia students now consider leaving their car at home

Montreal gas prices have reached an all-time high, costing drivers up to $1.58 per litre. As the demand for driving has grown in the past few months, along with increases in crude oil prices, the gradual return to normalcy has entailed more expensive gasoline.

On Jan. 1, one barrel of Western Canadian Select (WCS) oil cost about $41.70, which then skyrocketed to nearly $76.90 by Nov. 5 — representing an 84.4 per cent increase in less than one year. However, Moshe Lander, a senior lecturer of economics at Concordia University, told The Concordian that crude oil prices are not the only factor influencing this spike.

Moshe explained that, as global transportation continues to resume, the shipping and aviation industries are competing with Canadian drivers for the same resources and thus overall demand for gasoline has increased. In Quebec, there are additional oil transportation costs because gasoline is not produced locally, on top of the price of oil refining and federal and provincial taxes.

However, Lander noted that one should look at the bigger picture, and compare the situation with pre-pandemic prices instead.

“The fact is, gas prices have barely gone up at all. Pre-pandemic, gas was around $1.40 or $1.45 in most gas stations around Montreal. So add a couple years, inflationary pressures — it’s perfectly reasonable,” said Lander. “But if you’re comparing it to lockdowns, with no one going to work […] while gas was priced at $1 or less — this looks jarring.”

Nevertheless, current gasoline prices pose financial challenges for some Concordia students, who are used to driving to the Loyola campus on a regular basis. For Ora Bar, a third-year journalism student, driving is a necessity since she commutes to and from Chateauguay four times a week.

“Last time I had to refuel, it hurt,” said Bar. “I am now considering switching to buses, though it’d take me three times as long to get to university. This would create lots of anxiety for me since I’d have to leave very early to avoid being late.”

Bar estimates that her 20-kilometre commute from the South Shore would take up to one hour and 30 minutes. The five-dollar transit ride involves several transfers which Bar is afraid to miss due to low frequency on certain routes.

“We’re still students, it is expensive! I certainly hope the government considers more practical bus schedules and reduced fares,” Bar explained, saying that she is hoping to find a more affordable alternative to driving in November.

Meanwhile, Gabriela Serrano, a third-year neuroscience student at Concordia, has already decided to leave her vehicle at home for the foreseeable future.

“Because of the price increase, I can no longer drive to Loyola every single day. I realized that taking public transit is cheaper, coming from the downtown area,” she said. “But it was more convenient to drive than to take one bus, the metro, and then another bus — my commute to NDG is a bit more complex now.”

Serrano hopes the government will take action to avoid a surge in gas prices. “The pandemic was already a heavy burden for our economic situation, and now with simple things like driving to work becoming more expensive, it’s another stress,” she explained.

Gasoline, however, is already being heavily subsidized by the Canadian government. Last year, the country’s oil and gas sector received $18 billion in government financial support. In fact, Lander suggests that rising gas prices may lead to a turning point in North American car culture.

“That is a century in the past, we’re moving forward now. We have to price gasoline properly, […] at $5 a litre. As long as you continue to subsidize gas-fuelled automobiles, it’s making things worse — and it’s the hardest part for the consumer to understand,” he added.

Shifting such subsidies toward eco-friendly initiatives would help the city combat climate change. According to Lander, this would result in creating more pedestrian-friendly streets and cycling paths, limit Montreal’s urban sprawl, and make more funds available for efficient public transit.

The economist believes high petrol prices would push Montrealers to adopt electric vehicles at a faster rate. As fuel combustion makes the transportation industry responsible for 24 per cent of global CO2 emissions, rising gas prices could cause a shift towards a greener future, one driver at a time.

 

Photographs by Kaitlynn Rodney

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Opinions

What goes up, must come down, right?

Graphic by Jennifer Kwan

Last week, I finally got around to getting my new Opus card since I didn’t want to use my car as much anymore.

I did so, not because I suddenly felt the urge to be more environmentally responsible or felt that public transportation was better than driving, but rather because of gas prices.

Gas prices have shot up to $1.53 a litre on Sept. 12—a jump of 13 cents overnight. They have dropped since then, but still remain quite high, much to the dismay of Montreal drivers.

The reasons behind the erratic cost of gas changing day to day, however, remain a mystery for many.

Harjeet Bhabra is an associate professor at the John Molson School of Business. His principal fields of study are corporate finance and investments.

According to Bhabra, there are two major factors contributing to high gas prices: one direct cause—events in and around the US; and one indirect cause—unrest in the Middle East.

“Ten days ago, we had this huge hurricane [in the Gulf Coast], and what it typically does is force companies in the area to shut down and move people off the platforms of refineries,” said Bhabra. “There is then a production loss and so less available in the market.”

Supply and demand is the basis for the day-to-day behaviour of gas prices. The cost goes up when the demand strains the supply available worldwide. According to Bhabra, the need for gas in Canada and the US has increased in the last 10 to 20 years, and so has demand in China. Prices will, therefore, inevitably rise as a result.

But the traditional rules of supply and demand don’t work as they should during a time of uprising. In the Middle East, the unrest has affected many nations, and has successfully toppled dictatorial governments.

“Many of these nations are suppliers of crude oil to the rest of the world,” said Bhabra. “If anything happens over there, it directly affects the price of crude oil worldwide.”

Bhabra pointed out that in a scenario such as this one, the anticipation of a lack of supply is sufficient to raise the price. Since the market is uncertain if the supply will last or not, they raise the prices pre-emptively to counter possible future losses.

For example, the current overarching situation in the Middle East is the potential war between Israel and Iran. The Iranian President Mahmoud Ahmadinejad publicly advertises his country’s advancing nuclear program, declaring they won’t back down on their nuclear energy source project.

Meanwhile, Israeli Prime Minister Benjamin Netanyahu addressed American voters on NBC, dissuading them from voting for President Barack Obama. Netanyahu said he wants the support of an American government willing to attack Iran and Obama won’t do that.

It is important to remember that Iran controls the Strait of Hormuz — a narrow yet important waterway through which 40 per cent of the world’s total traded crude oil passes through every day.

A tactical initiative of the Iranian government has been the threat of blocking the Strait of Hormuz. Recent heightened tensions have worried investors of that threat coming true, consequently raising the price of crude oil and with it, the price of gas. Therefore, the political landscape of the Middle East has contributed indirectly to the increase in gas prices.

Quebec citizens have to deal with an even larger burden than the rest of Canada when it comes to gas. Our taxes on gas are the highest in the country, and account for 50 cents a litre. Montreal consumers pay an added three cents a litre as a regional surtax going towards public transit. One-third of the price of our gas at the pump is actually taxes. Just dandy.

There are many factors that can alter the price of gas, some more easily discernible than others. Like a society, crude oil fluctuates not only because of events such as closed refineries, it will also change depending on public opinion.

Speculation about the future, including in the Middle East, has a direct impact on the price of gas Montreal citizens will pay at the pump. With the way events are unfolding in the Middle East, a gas price under $1.20 is most likely not in the cards. In the meantime, we have the wonderful public transit system. I suggest we get used to it.

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