Ottawa Gas Prices – Why Are They So Low?

Ottawa Gas PricesSomething strange has been happening at GM car lots across the North America. Something we all thought we would never see again. It defies all logic, we know its wrong but yet here it is, happening across North America…

People are requesting, and even buying, Hummers.

Gas prices in Ottawa recently dropped below $1/L, prompting anyone looking at a new vehicle to no longer second guess a large SUV or truck. Why have Ottawa gas prices dropped so low? Here we’ll take a simple look at the two major factors that have gone in to lower prices at the pump, and why maybe you should put off buying that Hummer.

Ottawa Gas Prices – Really A Good Deal?

Before we get started something needs to be cleared up. Oil (the kind that’s drilled for, and contains magical dinosaur bones) is a key component in the production of Gasoline (or as our UK and European friends say, Petrol). Prices for gasoline worldwide are directly influenced by the cost of 1 barrel of oil. This can create some confusion, but know that the more expensive oil is, the more you’ll pay at the pump, and vice versa.

Now, lets start by learning the players in the global game of oil production. The United States is the worlds #1 consumer of oil with an estimated usage of 18,840,000 barrels per day. This is nearly double the next leading consumer of oil, China, who uses 9,790,000 barrels of oil per day. Canada ranks 10th in oil consumption, with an estimated usage of 2,259,000 barrels a day.

fracking gas pricesSo what does this mean for Ottawa gas prices? The United States does have oil of its own, but due to how difficult it is to extract this oil, has been relying on oil from the Organization of Petroleum Exporting Countries (OPEC). OPEC consists of mainly Middle-Eastern and North African countries like Saudi Arabia and Nigeria. However, in 2008 the United States began a process known as “fracking”. Fracking allows oil fields to extract more oil from the ground than ever before. This drove down the amount of oil the United States needed to purchase from OPEC. Once OPEC started to realize their biggest customer was trying to go out on their own, they decided to start dropping prices.

Fracking isn’t very cost effective, and a higher cost of production results in higher gas prices. OPEC has much more accessible oil, and has lower production costs. One potential reason Ottawa gas prices are low is that OPEC is trying to undercut the expensive United States fracking oil.

In short, the United States uses a lot of oil, is trying to make their own, but it’s too expensive. Their competition (OPEC) sees this, and because of their much lower production costs, tries to eliminate the competition by drastically lowering their prices. This global price war is a win for consumers, because it means that there is now competition for the lowest price on oil.

The price of oil can vary widely. While there isn’t quite enough space on this little blog to get into the economic factors of gas prices, know that sub $1/L gas isn’t here to stay. Demand will continue to grow, and with that comes a rise in prices. Fracking has also come with heavy criticism for being environmentally unsustainable.

A Warm War Of Sorts

Another factor as to why Ottawa gas prices are so low is current situations involving Russia. While Russia is the world’s leading producer of oil, they are not a member of OPEC. This, combined with a number of recent military encounters with the country, and the United States already tense relationship with Russia makes for a scenario where Russia’s economy can be weakened by low gas prices, allowing the US to feel safer. Half of Russia’s revenue is based on oil and gas exports.

The issues with Russia appear to be more secondary to that of the OPEC competition, but are definitely something that is being watched by countries around the world. Russia has been upping its military presence, and with the second largest supply of nuclear warheads, is a presence that must be recognized.

Ottawa Gas Prices Are Low…For Now

As said earlier, lower Ottawa gas prices aren’t here to stay. While OPEC countries can get by for now selling their oil for less, it simply isn’t sustainable. The current price of a barrel of oil is around $60, but needs to be somewhere around $100-$120 for these countries to maintain regimes and social standings they have in place. It’s only a matter of time before we see Ottawa gas prices back near the $1.30 (or higher) mark.

Maybe instead of test driving that Hummer you should take out a Leaf instead. Now is also a good time to get your fuel systems checked, so when prices do go up, you know you’re driving with the most efficient systems.

Ottawa gas prices

5 Year trend in gas prices. National average VS. Ottawa average

 

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