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Gas prices are rising while crude prices are falling. What gives?. H8 K4 J# a5 E1 [) q
Published: Friday, January 16, 2009 | 5:11 PM ET$ q3 F3 t" @. F
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine( R% D# N+ S+ i) J/ v
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CALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.1 I {1 {( K! K) ~' x1 L6 U
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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.% a2 M. t1 X( V2 y/ r
: W W0 r0 v0 f8 \1 D) BCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.
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+ z' x/ r/ v) m" b) W"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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) q& P! X3 _6 R# B4 DBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.
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"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said., _$ r: B/ r; y; P/ v; [: D
& \+ z* t; S0 O4 g) `2 j& K% K"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.) @. z; d+ v7 Z: Q- \
% x6 @- J0 f! S4 e Q2 xVancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.4 z& L9 J0 Q# y
9 i M) r7 L aThe price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.4 r* j" D. w: s+ u/ `2 K
7 T) v; M, j8 a S+ s5 G3 a! qThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.6 G) G% m8 ?) X1 u0 J
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.
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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.
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! w1 @- f2 P% ^But those oil companies - private-sector players in a free-market system - also want to turn a profit.
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4 Q; D1 }! Y+ H: }"Without question those gasoline prices are going to be the highest they think they can get away with without their competitor undercutting them," said Hirsch.! u* d. d# f2 e6 l, R
2 W& E) r( z8 X$ q+ _"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."6 p! W. ], |2 ^. s
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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 $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.) c* K4 b$ J' h4 i2 f% {
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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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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.6 N% }5 T5 t* I5 v6 V _
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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."; t+ w; ]* T( i% }* D. o4 {
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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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"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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3 a9 n: B/ m9 j"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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