As the novel coronavirus continues to spread around the world, several countries have imposed strict quarantine measures, including limiting travel, causing a drop in the demand for oil.
Monday morning, the New York Stock Exchange and the Toronto Stock Exchange temporarily paused trading after the plummeting oil prices caused stocks to plunge at the market open.
How will this affect gas prices in Canada and how long will this last?
Here’s what experts say.
Allison Mac, a petroleum analyst at GasBuddy, said as the outbreak continues, demand for oil across the globe has dropped.
“When you’re seeing a country like China, which is the second in demand for oil, basically locked down, there’s not a lot of gasoline being used in that country,” she said. “And because of that, there’s really no need for the oil.”
Allison said due to the decrease in demand, gas prices began to “trickle down” in mid-February.
Dan McTeague, president of Canadians for Affordable Energy, said the COVID-19 outbreak has probably accounted for a 40 per cent drop in the price of oil, which in turn has given rise to a 15-cent per litre decrease on average in Canada.
What’s more, Mac said while the virus outbreak is the main factor affecting the price of oil and gas prices, a dispute between the Organization of the Petroleum Exporting Countries (OPEC) and Russia has also taken a toll.
“The coronavirus is the main thing,” Mac said. “And then the second thing is that there’s a dispute between two countries, Saudi Arabia and Russia, where they couldn’t meet a resolution about cutting back the production, because if you cut down the production, prices will not plummet as dramatically as it’s been.”
The price of oil sank nearly 20 per cent after Russia refused to roll back production in response to falling demand and Saudi Arabia signalled it will ramp up its own output. While low oil prices can translate into cheaper gasoline, they wreak havoc on energy companies and countries that count on petroleum revenue.
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