Market Snapshot: Effect of gasoline prices on summer driving season demand in Canada unclear

Release date: 2016-05-18

The May long weekend marks the start of the summer driving season in Canada. During the summer, Canadian gasoline demand increases by 10 to 20 per cent above winter demand as Canadians fuel up for road trips to enjoy the warmer weather. The following chart on gasoline demand and prices from 2000 to 2015 illustrates several aspects of Canadian gasoline demand, including the fact that significant movements in pump prices do not always translate into significant movements in demand. Footnote 1

Sources and Description

Sources: Statistics Canada, Kent Marketing Services

Description: This combined bar and line chart plots January and August gasoline demand in Canada from 2000 to 2015 against the Canadian weighted average gasoline price for those months. Gasoline demand fluctuates between seasons, with January representing annual lows and August representing annual highs. Generally, demand in Canada has been increasing, from 2 606 million litres per month in January 2000 to 3 250 million litres per month in January 2015, and 3 200 million litres per month in August 2000 to 3 588 million litres per month in August 2015. Gasoline prices have also trended upwards, from 64 cents per litre in January 2000 to 93 cents per litre in August 2015, but with significant fluctuations over time. When viewed as a whole, the chart shows that major movements in gasoline prices did not always correlate with significant shifts in demand.

In the low demand winter month of January, gasoline demand appears “inelastic” or relatively unresponsive to short-term price movements (that is, winter demand remains largely stable even as gasoline prices rise and fall). For example, in January 2009 and January 2015, year-over-year demand increased 1.4 and 2.3 per cent, respectively, in response to price decreases of 22.7 per cent and 27.7 per cent. Furthermore, the largest one year decline in January demand was in 2006, when demand declined 4.4 per cent from January 2005 while the price actually declined 4.6 per cent from August 2004.

In the peak demand month of August, gasoline demand has ebbed and flowed along a general upward trend, with these fluctuations also not appearing to be directly related to prices. For example, in August 2012, demand dropped 9.1 per cent from August 2011 even though gasoline prices increased only 2.8 per cent over the same time period. In the year prior, gasoline prices rose 23.4 per cent between August 2010 and August 2011, yet gasoline demand increased 5.7 per cent over the same period.

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