Since the start of the U.S.- Iran war and the blocking of the Strait of Hormuz, gasoline and fuel prices around the world have soared. As of yesterday, the daily national average gasoline price in Canada according to CAA was 184.8 cents per litre though of course it varies across the country. For example, in Thunder Bay this weekend, it hit 203 cents per litre. Reasons for variation in Canadian pump prices at least according to the CAA include seasonal changes, weather conditions, increased demand, geopolitical conflict, status of oil and gas reserves, refining capacity, and the value of the US dollar given crude prices are in USD.
Of course, despite having substantial supplies of domestic oil, in the end, Canada’s gasoline prices at the pumps are tied to the international price of oil and so what better comparison is there than looking at Canadian gasoline pump prices relative to the international price of a barrel of oil as measured the price of West Texas Intermediate Crude (WTI). For the period January 1990 to April 2026, Figure 1 plots the monthly 18 city average of Canadian self-serve unleaded regular gasoline prices in cents per litre calculated from Statistics Canada (Table: 18-10-0001-01 (formerly CANSIM 326-0009)) alongside the monthly price in USD of Cushing, OK WTI Spot Price FOB taken from the U.S. Energy Information Administration.
The two series certainly seem to move together. However, simply eyeballing the movement does not really tell us how sensitive the Canadian price at the pump is to the international price of crude. For that, linear regression is a better tool. I took the log of the two series and then ran a very simple linear regression of Canadian gasoline prices on the WTI price. For the period January 1990 to April 2026, there was an r-squared of 0.86 and a coefficient on the price of WTI of 0.54. What this can be interpreted as given it was a log-log regression is that since 1990, a 1 percent increase in the price of a barrel of WTI in USD results in a 0.54 percent increase in the average 18 city price of Canadian regular unleaded gasoline at the pumps.
Has this been a stable relationship over time? Well, the data was broken up into two approximately equal time periods – January 1990 to December 2007 and January 2008 to April 2026 – and two more regressions were run. The results were interesting as they suggest that the price of gasoline in Canada over time has become less sensitive to the international price of crude. Moreover, the two periods separately are less sensitive to the price of WTI than when combined if one looks at the coefficients on WTI. For the pre 2008 period, the r-squared was 0.91 and the coefficient on WTI was 0.44 whereas for the post 2008 period the r-squared was 0.35 and the coefficient on WTI was 0.33.
Essentially, the results seem to suggest that over time the price of Canadian gasoline at the pumps seems to have become less sensitive to fluctuations in the price of WTI with variations in the price of WTI explaining over 90 percent of the variation before 2008 and barely one third since. What other factors might explain trends in Canadian gasoline prices? Well, there is the list of variables provided by the CAA, alongside which one could perhaps also add any changes in fuel taxation by the federal and provincial governments over this period as well as the degree of competition in the Canadian retail gasoline market. Naturally, a fuller and more detailed analysis with more control of assorted confounding factors would be quite interesting.
