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Gas prices are rising while crude prices are falling. What gives?4 B" K9 r8 [; g$ i5 ]
Published: Friday, January 16, 2009 | 5:11 PM ET
) J7 `1 x$ j8 {3 |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.
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0 p8 U6 e6 b3 J+ cThe 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.% ?9 D: R1 Q, C! g+ r
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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 $1.40-level gas many Canadian cities faced during the summer.0 V. d$ z9 C$ d0 ?7 H3 e4 Y. T* M
' C! A. Y! M/ d" j& c n# }"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."
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0 Y Y3 g( R2 t7 k0 ^3 \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.* l1 e, l6 F- e& F" K
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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.' j. A9 }. F! \8 n( `# h
$ d8 Q, G) w( u" `7 k- Q2 W1 wThe price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.: j5 p' l. `" f! J0 ]
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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$50 a barrel a week ago.
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F$ {" ]9 n# F6 I# C"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.* M+ p2 x q: p1 Q4 S, l
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But those oil companies - private-sector players in a free-market system - also want to turn a profit., `4 Y) r2 r. R$ z9 _0 e. r
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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 a; Y8 H9 I/ c' ^; ~/ {
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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.") |5 V6 i' B, [2 m& b% X7 x$ ^1 {1 g
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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 $42.57 on Friday.( W' X3 r9 e5 {/ z
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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; C( s; ^: u. ?6 UHirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.
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" r' v( o8 m/ @4 O& B"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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+ X4 D) P# u6 Q! e7 W! q" |"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."
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But Gasbuddy.com co-founder Jason Toews said he sees gas prices going higher than their current levels because of a slowdown in Alberta's oilsands and expected production cuts by the Organization of Petroleum Exploring Countries.; ~- r) o4 o* W8 K1 n; `% v( c$ I
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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.( x" F" P5 d; Y5 g
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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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