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Gas prices are rising while crude prices are falling. What gives?
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Canadian Press NewsItem/NewsComponent/NewsLines/ByLine
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CALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.
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The average Canadian pump price rose to around 81.75 cents per litre Friday - more than three cents more than a week ago, according to the price-tracking website Gasbuddy.com.( C! h- S! W' Q& i9 M" d3 Z
& {. w' j9 f/ S+ S N3 kCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.
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6 \' N$ {# e) Q"I don't actually understand it and I do work in the oil and gas industry, so I'm perplexed about it," said Paul Lawnikanis as he filled up his truck at a Calgary Esso station, which was selling gas for 80.4 cents per litre.4 W) r9 g5 u9 c- e/ W; Y5 ^& N7 U
! N! d0 {4 y+ C+ Y* j h, \But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.
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& ^7 }. z0 }6 |4 n# V E"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said. i) ?/ |/ V J) {
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"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."
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In Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.
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; B& l+ J- q7 w. G( U3 lVancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.% G" Y% G3 m- n8 S, i) P# D, N
1 K: u0 H w% `0 _2 [" }The price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.
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% i7 x: x- p- k: m% x$ iThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.
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: J4 X4 d+ B) G O$ `Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.. C; ~4 l3 j; J4 i# r0 q
6 X; H1 I: b. X4 d/ wBut those oil companies - private-sector players in a free-market system - also want to turn a profit.
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" m) f0 h/ s5 n( |5 J"Without question those gasoline prices are going to be the highest they think they can get away with without their competitor undercutting them," said Hirsch.
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"They're out to maximize their profits for their shareholders. I don't think there's anything evil going on in them trying to get the highest price. Every retailer in the country does this."8 s5 {5 m9 ]+ [6 B
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Another explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday." n+ @" m7 s- a
; G- ~+ j7 h: d; ^& B$ |. {"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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9 P+ v: a% R2 n; |Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer./ ~# k- }$ J/ Z% O5 O
$ a+ w! Q f0 t% N. E# j"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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& \7 N6 V0 T. Y! N"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."1 h( _8 r- v$ d7 {2 E# R& w" M# x7 p
! H( M& M5 s) X; P7 G/ ]1 K4 ^, ?But Gasbuddy.com co-founder Jason Toews said he sees gas prices going higher than their current levels because of a slowdown in Alberta's oilsands and expected production cuts by the Organization of Petroleum Exploring Countries.
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"With lower supplies of crude oil in the market it's going to push crude oil prices up, especially if the economy starts to recover a little bit," Toews said.
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"Once the summer demand for gasoline comes, we're going to see gas prices go up quite a bit from where they are right now. We're going to see a return of a $1 per litre gas for sure and we may even see up to $1.20 per litre." |
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