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Gas prices are rising while crude prices are falling. What gives?
0 T1 v2 I1 g+ Y$ j% P9 j H/ [Published: Friday, January 16, 2009 | 5:11 PM ET! x( F" w: J( r. s5 d. g
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine" U3 l- |1 V. b8 h- y9 G
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CALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.- X3 _1 w4 U' T& T& J' M
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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.: X) A2 k3 z- _: `# D
5 V- @8 x' ~* r8 z5 M9 j2 ]. ]"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.' }# {& H+ H( l4 V: ?: S, U
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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. `, G. R/ W& P& p6 `! F ~0 J Y6 N! L
$ }) P% V1 j! R) |& r; U"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."6 n' v5 F; a3 `. w, D& n+ A) e) l+ D
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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.
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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.% t( H6 q7 O7 L
% }9 v- a7 j5 c4 L# K( I: ]/ B- IThe price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.6 H. h- @ M) K: `1 u x
& U$ X" Q$ [7 ~3 x. UThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.
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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province. j4 r8 ?: _0 C$ ?+ x) e
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.& M; z) A' i7 l5 u! h) A
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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.* D" j& s8 E2 c" _1 o: o( }% p
* W, e$ o- Q9 y3 O- ^"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."8 _ V, }/ a" J2 b7 d, K _
7 ~: q( r5 d; c3 l3 A4 I; DAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said./ w8 ?2 R/ Y6 q3 j& @% d
3 c9 O' u* T) ^* y+ U! tHirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.; Q5 X. X, i, ^+ Z# S: z9 e
! P$ S/ Y( F6 b8 F+ `/ s2 d- x$ w"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.$ p$ o! A! B+ Q5 O. j1 \
. t$ o% w% k( m2 I"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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3 h' u c/ W" ^4 z/ k6 S"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- ~) R8 [. z% m E
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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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