Fuel prices are expected to rise sharply in mid to late February in Canada as gasoline demand increases, according to the U.S. Department of Energy.
A surge in the amount of petroleum that can be extracted from the ground and stored in oil fields will also drive prices higher.
The fuel prices, set by the federal government’s Fuel Price Information System, are based on the average retail price of regular gasoline.
Prices will increase by 10 cents per gallon for regular gasoline and 12 cents per mile for premium gasoline in the first six months of the year.
For comparison, the price of a gallon of regular petrol was $2.82 last week.
As of Wednesday, a gallon had been on the market for about 24 hours.
The prices will likely rise again as oil companies drill for more crude, and the government expects to sell more than 6.4 million barrels of oil a day in 2018, a record high.
Fuel prices have risen for the first time in eight years in Canada, as the economy continues to slow and as oil producers continue to ramp up production.
Canada’s fuel demand has fallen dramatically over the past few years, and now is the time to consider whether to continue to grow in this volatile market.
Canadian Prime Minister Justin Trudeau has said he expects a steady increase in oil and gas production from 2020 to 2035.
He has said that, as long as the world doesn’t move on, Canada will continue to produce and sell oil.
“The time to get ready for that increase in production is now,” Trudeau said on Feb. 8.
Trudeau said Canada would be able to keep its current oil production level for at least the next 10 years.
He also said the government will invest in the infrastructure needed to produce oil.
The government expects oil prices to increase from the current $3.30 per barrel to $4.00 in 2021 and then gradually decrease over the next few years.
Energy Minister Brad Duguid has said there will be no “price shock” during the peak of demand, but he has said the market will eventually become “more responsive.”
“We are going to have a time when we are able to make that adjustment,” Duguid said last week at the Canadian Association of Petroleum Producers annual meeting in Calgary.
“But I think we will have that time sooner rather than later.”
While prices are not expected to be as high as in the past, some economists are warning of a potential increase in fuel costs for drivers as the price spike intensifies.
“The fuel industry is seeing a lot of price pressure in the last couple of months, but it’s also seeing a huge amount of supply growth,” said John Hildebrand, director of oil market analysis at the BMO Capital Markets Group.
“I don’t think the supply-demand imbalance is going to be enough to cause the price to fall, especially with the fact that the demand is so strong.”
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