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Gas prices are rising while crude prices are falling. What gives?
3 `9 f( c3 T1 d( @8 aPublished: Friday, January 16, 2009 | 5:11 PM ET3 Z' h2 f! q/ g+ }1 d: f3 \
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine
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/ }/ L3 l, K# s+ O( I$ pCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.
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2 k, b+ P6 q; @( f7 l% b' hThe 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.( ~6 A1 E$ Q3 {, m3 ], v
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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.
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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.
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But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.
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+ B8 e5 H7 w) w3 r! c1 j# k- \/ D"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."% B" k( q: A1 Q" x- [$ y$ S
5 }! K: m' T2 Q/ eIn Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.. {# {- ]) _0 L. w4 T3 Z! E
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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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5 C# C# O( f+ E. p6 J0 M* |2 ~6 i0 SThe price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.7 v1 j- J) W. j0 ^" m4 ]
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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$50 a barrel a week ago.: c2 D/ y# N0 d- {3 }9 g
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary." l* X. {8 x# D! d& ]! X
/ q! E# f5 ~# {* m h; P3 `9 j. |' FIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.
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) ~9 p" E4 F8 ~3 Y2 w2 k; Q5 OBut those oil companies - private-sector players in a free-market system - also want to turn a profit.
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$ Z8 p' Q3 O3 v2 { t% S3 {"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." j9 v5 u! u0 _# `7 e
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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 $42.57 on Friday.
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+ T/ w+ ?. k/ {* Q"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.6 h3 X$ N/ o. n" M, T
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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.
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. c, u' U' Y/ Y; ]/ b"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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: j3 J/ o/ v/ ^5 o0 ~% ~6 e1 o"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."
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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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) a! r8 f( O6 a- V"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. m" o1 o5 x; ]0 r' I
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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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