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Gas prices are rising while crude prices are falling. What gives?
; q( M( x; C( g. [4 y: R# ~0 IPublished: Friday, January 16, 2009 | 5:11 PM ET6 E) c( V+ C' n* h( b# o5 t4 s
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine6 Y" a6 P7 m1 H4 ?4 J8 H1 b
3 O! r5 q& n1 A) s: U% XCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.
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* v& ]: m0 J! [% T; t( ]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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8 x S0 w I& ICalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.5 W. ^; o$ l7 Q; L
9 W. C3 i% Z' D) n" E9 W; k* m"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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/ Z0 `: Y" v3 F- D' H% Y+ ZBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.* x* V" U; ]( }: i' |7 u
0 X4 e& @8 R0 i( r"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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# D& E7 ]3 x) M, X; n"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."
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4 E$ E. \ A+ I E9 |( OIn Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.$ w; J! x% G& t) ^( |
6 S v0 |3 u9 G7 JVancouver, 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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7 Q- e+ O/ S' k9 ^: DThe 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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The February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.* R* l4 _1 _3 x# x4 \" f$ U
( D$ Q9 P2 P5 g2 P4 g/ A% PIndustry 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./ A- e/ Q0 N& k
% N; e% }. q1 T: U6 q! q8 A"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.& ?3 }% S |4 W1 j; y7 o0 y* Z
" A( u/ i e% v"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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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 $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.( O8 ?5 c6 V0 L7 X. N
8 y; K% ~' W3 U- O% BHirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.
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; r- @: D4 [1 b" y* E3 ?"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."
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But Gasbuddy.com co-founder Jason Toews said he sees gas prices going higher than their current levels because of a slowdown in Alberta's oilsands and expected production cuts by the Organization of Petroleum Exploring Countries.) J5 y+ T8 O5 d, R
/ ~& q" `+ G0 Q; q+ e4 a) t, b6 ]"With lower supplies of crude oil in the market it's going to push crude oil prices up, especially if the economy starts to recover a little bit," Toews said.4 ^' m2 {) P2 k3 Z" w$ @7 `4 i v
! g0 G4 ?$ m: @1 m! N5 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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