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Gas prices are rising while crude prices are falling. What gives?2 W$ ]: I" `1 B0 v: |
Published: Friday, January 16, 2009 | 5:11 PM ET8 {& d( d/ m$ q
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine
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( U& K/ k. @" dCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.* [; a( K& f" c( y' O
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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.6 v) ?+ _2 E9 j$ u" a" {% u6 |# y
' {1 a2 Y. u5 C' L' D5 F3 jCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.% U5 z% ~* x& ?9 R! T# ^
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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.% ^% u! |) X' r& I" F
, i/ p/ ~, J9 o% ~But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.) k; d' w# Q6 m! p8 p: q
_" H, h- o9 S7 Z+ C/ B! X"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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( L7 O1 q" w- U7 ~7 v; HIn Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.2 F+ I8 [6 p+ l6 l: F3 o
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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 $147 reached in July., Q7 K& R8 x$ W/ b6 x
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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$50 a barrel a week ago.
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4 a7 J A u- E% |( q$ T"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.6 n7 A& f6 \& W( z; _
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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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, Q! M: K' V! Y( y% C ^6 G"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."5 P S: ]- G' E. J/ u# [
4 j: c2 @4 a7 _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 $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.
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V+ X5 D4 M& D Q' Z4 {- V"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.- u' i! L; @9 t3 v
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"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."4 D& i. c$ N4 \4 F
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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.8 O8 @$ T, I: \2 X! m
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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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"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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