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Gas prices are rising while crude prices are falling. What gives?. f6 U0 }$ P3 ~# z1 g
Published: Friday, January 16, 2009 | 5:11 PM ET( G6 g* `) L' Y' J' S8 N" Q
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine( G! z1 @. V# h, Z: ]2 P# S
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CALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.4 h v1 t9 ~3 G) d3 o7 Q
: F; n5 G5 j$ B: N( u1 L3 IThe 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.1 N' }9 ^6 ~ G
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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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; P# C. J! h0 k9 I2 ]6 S"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.- [" K+ q1 N' m- \$ U& E
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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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& x- H/ E" q( I, R/ i"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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6 O* d# Y. ^ z, d: U"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.
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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 $147 reached in July.$ g& Q3 _& X, J1 z
$ \! g' ]/ Q0 u3 gThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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& J7 U* ^- R: Z! d, e x"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.
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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.
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"Without question those gasoline prices are going to be the highest they think they can get away with without their competitor undercutting them," said Hirsch.7 s, P( ]$ R4 t3 F
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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."8 c% f- H9 Y* S8 o, d/ M; h
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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 $42.57 on Friday.9 e6 U4 C6 Y5 k+ C- L8 u
* `5 d8 X7 V# o: k2 ]( x- U3 o"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.% o# N" h# m m) v* Y* J2 u
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.- c* ~0 J8 A, D8 N
7 c) f& M, U$ y/ n0 t* p3 p"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.1 O$ Q) ?: k3 T
4 }5 l3 f* b* i& w$ J6 s"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."! H* x4 Z% S+ _" M1 N
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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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: L3 c% k+ @+ Y" s! E"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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"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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