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Gas prices are rising while crude prices are falling. What gives?+ n# D* v/ d/ ~' ]
Published: Friday, January 16, 2009 | 5:11 PM ET
1 H+ \* W. o+ N$ |& d9 rCanadian 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.0 b( P( j) y* E8 }* i0 n' j
; u, Z7 X+ Q3 k0 j3 C! z8 |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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"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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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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8 Q1 I+ S+ o, \% j0 v) R" {* Q, Q0 x"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.8 o8 \. i; x2 |+ ~& o5 G
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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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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./ \& N8 x8 w' K( F
3 U. n9 W, \& H* |& LVancouver, 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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1 Q9 q6 ]8 O2 q2 V4 R3 W, YThe 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$50 a barrel a week ago.
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.# [7 |5 ]/ Y3 R* x0 i* @
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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.
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1 a! m Z1 @" M N, ~' E- G0 \But those oil companies - private-sector players in a free-market system - also want to turn a profit.
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: S% S* M: ^/ t8 V: \: w% _"Without question those gasoline prices are going to be the highest they think they can get away with without their competitor undercutting them," said Hirsch.
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& Q" @- M3 S* U"They're out to maximize their profits for their shareholders. I don't think there's anything evil going on in them trying to get the highest price. Every retailer in the country does this." B. A" w( \* M8 t; ~9 P
! C* ~3 b/ H8 G6 [; D$ z7 {5 JAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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9 E4 X0 Q @" b0 H5 |, M7 `Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.
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' m! p8 w6 V# E) x" U2 x: v' p. _"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."" I7 c O; {" A* ~/ Z7 G' Y
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But Gasbuddy.com co-founder Jason Toews said he sees gas prices going higher than their current levels because of a slowdown in Alberta's oilsands and expected production cuts by the Organization of Petroleum Exploring Countries.( Y) I# B5 H- y+ T# E, H; m
1 l/ }$ o3 d. C8 F% J"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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3 T, L! u) p. z% o"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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