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Gas prices are rising while crude prices are falling. What gives?; g! ?# I, l& Z) O# ^- S
Published: Friday, January 16, 2009 | 5:11 PM ET/ q Z, z- C8 `- |
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.1 \: X5 |' t& J$ y
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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.) w a- G% `0 ^8 s8 a7 ]2 t
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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.( K" k+ p/ F/ A v/ ?0 e& ~
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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 $1.40-level gas many Canadian cities faced during the summer.9 o1 Q( W0 S' W
( q9 J) Y1 {; S% [5 B. l3 M6 f2 b"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said., a6 a2 H/ Q$ ]7 e
2 S' n9 I4 X4 T% v"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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E; I' N ? rIn Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.! O8 o6 M8 h3 H8 l: K$ ]) |( h/ u
8 P) m1 O' Y$ |( Q( hVancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.3 _# q' r1 ^4 C. f/ {9 k
/ f* C0 ]- z+ g, v3 ?5 s `" Y) wThe 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$50 a barrel a week ago.
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0 d7 H( C/ b+ n) P7 q8 x"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.$ Q& _/ [$ Z& }/ k4 i
/ |5 ^7 h/ \5 i2 A; zIndustry 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.
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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.0 r1 U- }9 M$ E0 ~
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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."
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7 y. V1 c* ~ F% lAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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. {/ p/ t! d! N6 x8 U! kHirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.
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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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- V. Y9 r( V. g# T& }' U* X/ b6 I"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."5 w2 o" a g! C: E
) q+ T5 ^$ Z" L; C5 a6 W( X# `# aBut 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.' z6 [/ o; v N! E8 G' S9 l
' U0 f6 B9 p) I0 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.
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) z- l$ Q4 E! N q$ 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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