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Gas prices are rising while crude prices are falling. What gives?! O* c1 z# d- b. ]1 J* h
Published: Friday, January 16, 2009 | 5:11 PM ET
: s7 l1 H3 _) z& v& ~Canadian Press NewsItem/NewsComponent/NewsLines/ByLine7 C t. A* `6 e; a- d; c( G
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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.5 y( M1 B; Y. F. J" c, D- E# A
; Q2 J$ T( m3 o8 q6 C" ]) qCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.; c9 e" r% M1 A$ T' J# P- P1 j
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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.# n, Z3 W6 k7 z. v) J8 ~
) ?/ J T* N4 m$ G, |But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.
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"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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8 m$ s' L, x6 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."2 `9 S/ J4 n, s
& h+ V) \$ a2 A4 }2 E5 N XIn Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.+ Y2 T4 O8 Z' W* K$ z
* D5 L. J8 h5 x% b* pVancouver, 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 $147 reached in July.( v) j# ~/ E) s' J8 W& \
' \. V$ S; d' M" KThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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" q) B" _; J# x/ @"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.
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* O% X O2 v$ p6 zIndustry 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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But those oil companies - private-sector players in a free-market system - also want to turn a profit.2 n! C) P- s) {3 K9 ^! O
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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.( M" U2 E0 L$ t9 G( M5 p
/ V! X# s' `: t6 M% t8 Z! u6 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."9 o. D* H7 _0 Z, G6 |5 t
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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 $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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! @$ X; J% v3 C. m- uHirsch 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.
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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.", M4 } q/ L9 @* r8 V
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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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# E: f& W9 Q' O+ f* m"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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t0 B$ O/ }) F2 \, a& v"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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