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Gas prices are rising while crude prices are falling. What gives?2 D i$ C6 s9 C2 k [2 ~& e- l+ l
Published: Friday, January 16, 2009 | 5:11 PM ET
$ u; ]2 ~! S( u- c, d$ LCanadian 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.
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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.# Z2 i. M! \/ L
+ I4 ^. J8 Z( G. U$ ^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 $1.40-level gas many Canadian cities faced during the summer.
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8 O: u$ j9 M* z1 J7 s8 e2 K: I3 U& n"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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' @: B3 b# h: }; K3 @"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.") v* t5 I$ @3 I6 w
& ~9 \) v0 z# F# p2 KIn 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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+ K/ Q6 j' l! g( S! m2 bVancouver, 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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6 _+ `' X( p: {: ~# D+ yThe price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.
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; k) P3 g/ E* b+ X/ l0 IThe 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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"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. ~7 j! n# k5 ], I; j( J: c: ~
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.6 [* K5 i% E1 ~0 `
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"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.' Q6 [1 r" e4 H2 T
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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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! q3 U9 ?% w9 s% F) ]0 lAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.
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+ p1 _1 n: y# l( T! ]"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.! b Q% |8 |( X* P0 ~* Y5 |$ P& h
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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."# K4 ?3 c) z/ L* e8 V
+ O2 [# S$ q; ?* e8 r& R$ ?7 c$ aBut 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.# h; F) v% J1 D2 D3 Z/ g8 G& k
5 a; A3 B; {' a/ \: B"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.6 g1 t# Z* d. F' b: q
9 t% ^! W% n' m d* H0 ^3 q"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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