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Gas prices are rising while crude prices are falling. What gives?6 a" C8 e2 ~7 n, J0 ^
Published: Friday, January 16, 2009 | 5:11 PM ET4 l# [7 k: t2 G t6 E
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine P' ?. X& X \# e) a) f# p
1 W, F0 O6 |. x6 mCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.& w& r$ {, I* ?( 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.
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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.
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( o9 B- Z# {7 Q4 V"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.7 _( e: x" g) L1 t7 O+ P
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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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"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."8 \7 ~; c' D3 D* ~9 ~) _4 A
& u# n/ R9 ^- {1 h7 j. i/ G4 [ dIn 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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. l, p! x! V4 ]( ]0 [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.! o/ B) J+ _" ?& H |
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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$50 a barrel a week ago.) \1 G$ O/ }6 B0 p( b. }
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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.' o: E. B) H7 u, Y9 \
3 n; K/ V- {) q" Y {5 `Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.+ |& @0 w' H: N, }2 \
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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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"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.6 o$ Y" y; a( D, \+ H" f
- X5 G" N' _0 T" j% w6 n"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."7 w) d0 {% t0 v8 u" T0 ~, l
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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 $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.7 g$ W" o; z! k/ V9 |! `7 V
& \+ i* q) x" `- z W( X3 QHirsch 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.4 L& K# s( e# ?& o
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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.$ G% B- A' c4 R) v l
6 a, o8 d$ p1 ~5 o" ^# D"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."% ~. u& g" d; I
' i! a4 \9 n8 d( o. e8 q# r* {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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( v& l; ]( g; Q3 H: z# g# ?"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. p }8 ]% G) I( t/ G5 U
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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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