Brace yourself gas prices are hitting records as global energy crisis arrives in Canada

An acute energy crisis is making its presence felt in North America as consumers are finally starting to feel the pinch of much higher prices to fill up their carsand heat their homes.

The average retail price of gasoline in Canada hit $1.45 a litre on Wednesday, according to data compiled by retail analytics firm Kalibrate.

That's a three-cent rise from Tuesday's leveland enough to beat the previous record of 143.6 cents, set thisAugust. Prior to that, you had to go back several years to see higher gas prices.

The average pump price topped $1.40 a litre for the first time in 2008 andthen $1.41 in 2014,research analystSuzanne Gray told CBC News in an emailed statement.

While there are many factors that determine the price of retail gasoline, the price of oil is the biggest one, and crude prices around the world have roared back in recent months as supply and demand is proving to be more volatile than usual while the global economy is trying to emerge from the depths of the pandemic.

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Reduced supply driving increasing oil prices

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As demand exceeds supply after months of lockdown, gas prices are rising in Canada. Other countries are also seeing higher prices for fuel, but are more concerned about overall availability.

Like just about everything else, oil prices took a swan dive in the early days of the pandemic, as travel slowed to a crawl, factories closed up shop and the world economy effectively went into hibernation.

This slowdown went as far as causing the oil price to dip below zero for the first time on record in April of 2020. Oil traders literally couldn't give away a barrel of oil forfree and had to pay money to have people take it off their hands.

• ANALYSIS: The day oil was worth less than $0 and nobody wanted it

Oil rigs went into survival mode to make it through the pandemic. But as demand started to creep back, so, too, didprices. After dipping below zero barely a year ago, crude prices are now back to their highest level in seven years, and analysts say higher highs are coming.

"We're probably going to see prices continue to rise through the end of the yearunless we see another kind of COVID acceleration," said Rory Johnston,founder of the Commodity Context newsletterand managing director at Toronto-based investment firm Price Street.

Normally, oil prices tend to ease off in the winter as demand for driving and flying in the northern hemisphere declines. But COVID has thrown the normal seasonal patterns completely out the window.

"Because of all of the pent up demand and these random reopening paths we're on globally, it's really hard to ... ascribe a very normal seasonal pattern," Johnston said. "I think it still is yet to be seen whether or not that happens."

Edward Moya, an analyst at foreign exchange firm Oanda, says crude prices could have a lot more room to run.

"The oil market is still heavily in deficit and that will likely be the story over the winter. If the north has a cold winter, the prospects of $90 oil seem very likely."

Global energy crisis

Higher pump prices are probably the most obvious example that consumers notice, but in reality, what Canadians pay at the gas station is only now catching up to what the rest of the world has been seeing in energy for a while now.Put simply, the price of everything is skyrocketing.

Natural gas prices are skyrocketing in Europe and Asia in recent monthsas demand has increased at a time when supplies have never been lower.

The fall has been colder than normal across much of Europe, causing Europeans to reach for the thermostat. But supplies are lower than usual because exports from major suppliers, such as Norway and Russia, are down.

According to data from Gas Infrastructure Europe, the association for gas companies on the continent, storage tanks are almost one quarter empty right now. Typically at this time of year, they would be full to the brim in advance of the cold months to come.

Natural gas prices have increased more than fivefold in recent months, and more hikes are expected.

Europeans aren't the only ones short on gas either; China finds itself with avoracious demand for energy, too, which is causing gas exporters to go to the highest bidder. Rolling blackouts and shuttered factories are the norm in China right now,as the world's most populous country is having trouble keeping the lights on as things reopen from COVID-19.

It's gotten so bad that it has declared a temporary truce in its ongoing trade war with Australia, because it is so desperate for coal.

In Britain, gas stations are running out of fuel, with little relief in sight.

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Britain is trying to find 5,000 truck drivers to deliver gasoline to stations, even issuing temporary visas to Europeans to help ease supply chain problems.(Jon Super/The Associated Press)

Utility bills expected to rise in B.C., Ont.

While drama like that hasn't happened yet in North America, consumers should expect their bills to rise.

B.C.'s main gas distributor, FortisBCwarned customers in September that the average bill is set to go up between nine and 12 per cent starting this month. And Ontario's biggest gas company, Enbridge, has applied with the province's regulator to increase what it charges consumers starting in January.

"As if we don't have enough sources of inflation pressures flaring," Bank of Montreal economist Doug Porter said in a note to clients on Thursday.

Soaring demand around the world "points to higher prices ahead for Canadians to heat their homes this winter," he said.

Kit Juckes, a strategist with French investment bankSocit Gnrale, says energy prices are spiking so much that he expects governments around the world may eventually have to step in.

"How much governments will end up subsidising gas use will vary from place to place," he said in a note to clients on Wednesday.

"In the longer run, we don't think current prices are sustainable, but the short run will matter more in the weeks ahead."