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Gas prices are rising while crude prices are falling. What gives?& h b' l+ A' C4 K+ |9 @
Published: Friday, January 16, 2009 | 5:11 PM ET- y' N8 G5 _% ^5 L& D3 i2 R9 S
Canadian 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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) i( f1 b2 {$ zThe 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." x" K7 U; M7 k% p7 s. X
6 d# d ^- n* g& TCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.
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& {, n$ I6 Y2 n1 \6 S1 M6 k; F) k! X"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.. a+ R: M3 J* n5 b( M
% }2 ~( x) t D+ u: F9 c: s7 mBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.
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"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.3 @! M9 [- O$ k' K7 o
- V3 h; @3 k; a& I( s" |"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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% }0 l% l. R" ~2 uIn 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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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.
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# w3 {' T* B" {The February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.( z S! s1 x% N
5 b/ S+ d' \3 ^"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.3 f3 ]: b6 {- Q& k! X
* ~% J& [. m' X4 ]' nIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.
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2 R! h) w, g% @. z$ D D9 R8 JBut 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.% v( j& P4 }; C0 k% F& `. C% b
5 A2 G* u6 s0 T"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."( F& v; G9 h1 e5 o" e" g/ E
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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 $42.57 on Friday.7 E3 z, P# E% q' v9 G
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.
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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.2 z2 N) u' E$ `: E% ^; ~$ a
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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.
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$ K# r! y; n2 t3 }"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., n* `$ c) O& L+ a9 Y, Q; ^8 Q2 h
* {0 @5 N6 l/ L R"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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