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Gas prices are rising while crude prices are falling. What gives?8 n. v+ r. B$ F) x2 D& ^
Published: Friday, January 16, 2009 | 5:11 PM ET
, p% I5 A7 K% E, k r- vCanadian Press NewsItem/NewsComponent/NewsLines/ByLine/ o1 t& n5 s7 {% b
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CALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.! F% D6 M! Y' m% D& n
5 @/ H u' k; Q' B) w4 L: \$ 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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2 L F' t% V- H+ P! ACalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.2 y M/ ^: c& L! B. i1 i
- |( {* ]6 V$ c6 y$ v7 k"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.9 v# c8 E- I( \
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But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.) B* t. W! }; D
) ~1 `. {1 U" A"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.. i& V2 o' y1 o: o& l, p
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"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."
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0 h4 d4 |' { |8 gIn Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2./ D8 t. E5 B: U+ u3 X
3 [+ |3 \% I( [1 L. @/ U3 `Vancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.% c$ e8 ^# q1 S, U" b& S2 S; a: Z
% |9 B! Z1 m, e& I$ {" 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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* _% Z! w* X( |. oThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.
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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.) ?. P4 {# f2 L$ ^0 u' C" D( n
4 A6 T9 W N# j$ L: SBut those oil companies - private-sector players in a free-market system - also want to turn a profit.. n& ?1 k8 T+ T' d5 j0 I
$ U3 O4 C' l: @, n- k3 m S; a# y"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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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 $42.57 on Friday.
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0 p' L+ Y( f$ U6 F/ E"(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.% j" V( z! ?2 o+ j" O5 m* i
, m+ M v! O" h0 O( q2 R9 l# 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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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said./ M# u1 O& ]( J E% j* W; X
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"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.
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: {2 R5 }; U1 D9 ~1 Q; s2 R"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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# p# x# g6 y4 E8 D& B2 N! 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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