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Gas prices are rising while crude prices are falling. What gives?/ x: U- X$ A C9 h' x/ O: h
Published: Friday, January 16, 2009 | 5:11 PM ET
( |/ a* p* c! a. ]* W9 O+ FCanadian 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.. v0 o( |7 a) {! e$ K/ K
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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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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.: t& H l6 G# H4 t0 x
$ G* R0 u) Q4 Y1 u3 j: f"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.. p; e2 Y5 i2 ^# w9 P& l
* E% X8 ~; O: R* yBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.: \4 j) U1 R: u! a
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"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."
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3 d4 O. a" v' R! w6 M! M. \In Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.1 u0 o' g: O: e$ |4 d. Z0 [ g
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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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' g6 V" a; Y1 RThe price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.$ O: [0 m& i6 b6 X1 v
* ?9 V# Q* Q9 I" b$ sThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.2 q# j" M: w, w0 I9 ~: @
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary. f' \; K8 p# R0 z% N4 b( C
" B8 v) \1 X4 T/ @Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.
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* ~6 E: ?8 u% k7 L+ M( m$ j6 b' qBut those oil companies - private-sector players in a free-market system - also want to turn a profit.. f& U- Q; y( Q* U
/ S3 i% m! c' w"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."
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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 $42.57 on Friday.- s! \5 b% j ]6 |' O4 x! M
- a4 }0 q3 \! l$ Z# E( k. n) C"(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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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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4 x3 q1 Z9 V3 a3 ~! h4 u"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.# C; Y+ `* T& e1 C: _
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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."
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# x. b7 D X1 T* ?$ sBut 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.2 d- b* D4 e2 M1 {
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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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