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Gas prices are rising while crude prices are falling. What gives?: j0 t1 a! r6 R; n) a- h- _. ?" h
Published: Friday, January 16, 2009 | 5:11 PM ET" ?7 x# D( w U8 u1 B. b( _
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.9 ~ @% D) w% z9 b, u" b E
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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.
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. S- y; r. u% B7 R! a4 {Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day., a' U2 A& Q6 r! s" X: y+ M/ |
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"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./ t! ~: H- |0 i( i6 X7 X
6 l* d* g8 b2 c1 dBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.' o. ^$ u( \1 K! V6 _
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"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.
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) J& h. w M; V) K7 C" z8 P' _"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."" E( u4 Y! F; x. t1 s
, i7 ]$ H0 M ^6 a9 _1 h) |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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Vancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.
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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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The 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.1 ^. A, X1 M7 O5 u
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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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. ]" m5 W9 y# B* N! ~# E/ h/ Q- QIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.
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L1 U: g; k7 Z9 Y"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.7 \* [& F5 l' W, } D0 t
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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."
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: f& q% O4 i! {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 $42.57 on Friday.
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3 l+ O6 ~$ M2 N+ M1 U"(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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2 b7 M8 ~) ^3 G& \& d$ RHirsch 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.- Q; e( I3 O9 o2 F3 \
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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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"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."7 D+ o" o* `, I/ j; B' ]
) u3 i' z/ Y- O% gBut 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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9 G- O9 l% e1 K/ \"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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