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Gas prices are rising while crude prices are falling. What gives?6 V1 H O+ [% F3 s7 q
Published: Friday, January 16, 2009 | 5:11 PM ET
2 N* G, P* R: S, iCanadian Press NewsItem/NewsComponent/NewsLines/ByLine- Q: Q, ~1 {' F1 } _8 _
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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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4 M( Q4 o, x8 {+ [; H0 _; U C" eThe 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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1 s: m! U/ u1 a. k8 q9 I) u y"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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2 s2 ~7 Z) c5 d6 c' {But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.
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6 `4 ]- j7 }# c7 ^) K& c6 f"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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& S" u' J7 I) M$ L( J- 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.") l0 l0 \/ g! |
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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.# T2 m: C# Q; d4 A+ d1 s' w) J7 J
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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.- {, j/ f. G V8 W& a& p
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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$50 a barrel a week ago.( g% @! ~: {" m
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.
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+ A# y; b& ~# `0 ]. }& kIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.: ?+ l* n* K* u& g3 ~
- _0 E2 F+ n3 T$ i3 o" CBut those oil companies - private-sector players in a free-market system - also want to turn a profit.
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# H/ m- Q/ n8 T4 f1 F"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." E' h8 N! Q h' H$ d: B) H
6 a7 d3 T) k! e"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."2 L, l |0 C. K- ^
* m4 H' G5 ]% w1 t# w# wAnother 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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+ s0 [, v. N7 w% |6 RHirsch 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.- m) C6 c2 W. J
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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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- d- X M; J2 @ `! ]3 |8 x! c) Q"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."% T1 u* l0 w2 N" n5 ]
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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.- n. f) L& O3 s) V
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"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.9 f: F& D( z7 B0 ~. x
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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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