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Gas prices are rising while crude prices are falling. What gives?! Q1 o8 d9 K8 X+ j# x0 w
Published: Friday, January 16, 2009 | 5:11 PM ET( L* [/ z6 Q, w
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine2 y6 L' Y0 q% O- A3 Y
8 a- v7 v/ n" G' L, k K; lCALGARY - 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./ q" Y+ b% X9 @7 I0 U+ g
7 A; Z( k8 u( F% P9 O$ F4 x& yCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.6 N4 l9 _% E% a0 k4 N* F W$ L+ V
$ e* q& ?4 i/ q8 s"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 $1.40-level gas many Canadian cities faced during the summer., B: u. l- K! M, ?* o/ d
0 [, Z, ]) o- D( w. z/ g"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.9 u6 T5 t% Y6 O8 z0 w. e' W
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"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."5 \8 a: X# |# x& E! z' W& m( I$ r
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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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Vancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.8 ]; y' J! U) u [
$ O8 \& N9 h7 {$ bThe price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.5 ]1 D+ W" A' ^; K# `' L7 \
9 N& }- H5 F3 l5 UThe 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., m! C* I% D: a& H F
9 \' P& d6 K8 n6 F- Y) U0 \"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.5 x# [) u8 [2 l: T3 p
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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.5 h7 V* n2 s: y( n% a! @
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.4 H6 n5 C' I1 P
: v+ t3 {% H; b; }0 ["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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. z; U2 t+ t7 z2 x- y6 w4 D"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."* x+ I4 s& O' \0 }; g2 o* A) i- Y
5 O5 c% V! B3 H! o; z# pAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.
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& G2 o: c9 _! X8 \3 h7 K' l+ N. F"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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5 r1 K+ V: T* U( Z; G$ \' I" p+ eHirsch 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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& o% |' h( N( A* w. [- Q( Z" V"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said." h7 x4 @9 `) G) R# i
" x8 S2 e! @* o e5 q"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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. F% ]4 a, h" F( f: J( yBut 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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. w0 U, z) [) W6 A8 o"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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