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Gas prices are rising while crude prices are falling. What gives?! r x2 Z1 b& C8 h' s
Published: Friday, January 16, 2009 | 5:11 PM ET) i% q, t: L: u( L+ }& a( p) ^
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine
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8 `4 G1 h7 y( L- t) j* oCALGARY - 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.
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! z. h: t) X0 i' Y* a# q; uCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day. R' v, X5 X( _" L3 i. y, X3 [
6 V6 ?* h( `" H h z, |' k4 j"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.2 d) J, g* b0 z4 K# [
) S$ ] r0 d2 K# X# \7 ~; R' ~But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.+ n+ l. | B% V9 D$ E0 L
; W8 m, F! q# C- d1 v"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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* |, O4 R( V# E& T% n/ |- ~In Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.8 g$ L5 {6 K! B+ q1 G& s) z
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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.- }4 P( y1 M" E( r' o
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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.. N% y9 ]4 o/ e: p w
4 m' s3 p7 n' x( kThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.- X6 B7 e7 s$ B" b6 u
' E6 w5 q9 a8 i! l( J( e"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.( K. g& |4 V: A( i2 i J" E( l4 M
6 }' l, Q7 l! Q" uIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.5 `* l6 b& Y( k' r5 A) r( H3 V3 f
# ^, w# G1 L. m) [7 h( M0 pBut 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.
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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."7 Y% V5 ]- b, v
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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 $42.57 on Friday.
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) ^& ?5 s0 Q& Y) J) m0 L) b"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.- x6 E' c# v: j# ~' N1 v) x
8 [; |, b: o6 ~Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.6 @3 w1 O: K8 j8 P9 a
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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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. J$ ^5 Z" U& O; ^"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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, b9 T3 T# i' C6 G Y9 }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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"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.! t" `2 \4 u- J
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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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