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Gas prices are rising while crude prices are falling. What gives?. p6 @3 O3 S- [- u' ]7 f- [; R
Published: Friday, January 16, 2009 | 5:11 PM ET' ?2 @- h; f0 n
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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) D$ S* r& k" j/ `) d" I, p" ?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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# g( l2 g& w2 V+ oCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.) u3 [- J: l/ r4 Q. U% K6 H- @1 L
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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 $1.40-level gas many Canadian cities faced during the summer.6 Y0 O8 n: L. q* {% ?/ f, ~; u
" r/ ]+ R* |' G G& X# l% ]"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.2 h$ P( d J" z, M& l+ r
: v6 g0 L' h. n. i* W% H"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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4 R4 {% O; }5 B" ~5 Y0 w T" YIn 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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$ E! u0 q& b, ~+ I% }. w. NVancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.. u0 s' }8 Z- Q1 M% l
# m% U. Z9 N6 C/ y8 r- oThe 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$50 a barrel a week ago.2 |6 f# v; Q, |3 g; d. \$ b
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.# s! S' R4 s( C/ x- s* c
" V. s4 s/ y1 V, I/ q/ lIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.8 o- N0 q3 N( k" I- H
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.
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"Without question those gasoline prices are going to be the highest they think they can get away with without their competitor undercutting them," said Hirsch.
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"They're out to maximize their profits for their shareholders. I don't think there's anything evil going on in them trying to get the highest price. Every retailer in the country does this."
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$ p0 c I% U6 a( g/ v: B; ~# GAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.1 `% j: K( G# ~$ j6 K( k
. m* C+ ~9 Y! Q: A0 _1 P"(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.' g8 i* Z& V2 U7 H# u& f4 `5 a6 _
( a# l! S+ s0 @* ]1 mHirsch 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.+ ~7 C8 \2 L$ B7 T Z$ p9 Z4 F. R
( o# [, k1 L1 B/ a w% L/ G"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.0 E+ j. Q% B! O- z7 {4 ]
+ F' n4 D4 L" B- 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." S1 f t: f: z0 B) Q) G* ?
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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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5 N9 r0 S% g; e1 P* c"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.4 n3 u* d9 K7 g2 D( I
$ d* ~- _- K+ x- ^) Z$ U"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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