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Gas prices are rising while crude prices are falling. What gives?" ?, `3 G; h& [* x
Published: Friday, January 16, 2009 | 5:11 PM ET
, \( G, h5 x! [! _Canadian Press NewsItem/NewsComponent/NewsLines/ByLine% h7 @) S# Q" J+ ?% f
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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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9 u; U! ~5 d1 oThe 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.7 A: U! ^0 A( Z
" d, t: @1 N" F- q& A+ yCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.
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1 n. X) |. |. f% h9 [- S/ m# k' c"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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+ n$ y3 n, O! [2 b* S6 D2 vBut 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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"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.' q* q" R* b5 ^& G5 B( L6 A F
: C8 ~6 p; S9 H- ]" t) J"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.& I7 \& W3 o0 g* Y/ t7 x8 v
/ J5 o1 \. @3 SVancouver, 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* T6 N+ Z, K1 o
/ A6 R& `5 [- p2 QThe 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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6 w6 J0 t- D) {% \% f"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.. N* W+ v A T/ h l
9 R7 m! W" O/ j1 aIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.7 K9 R e" O" v; k( p. p* n
% H- R; T3 @+ F% N6 MBut those oil companies - private-sector players in a free-market system - also want to turn a profit.: C4 O8 _; r8 G+ e4 ?8 y
4 X% h+ E+ y! y5 P5 @"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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! ?3 p) W+ j1 `4 i9 T"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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* {/ W" n9 e5 _" Z3 xAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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9 Z: e4 P- D0 O9 j; o& C2 J! j2 }1 _Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.
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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."+ C$ L9 F4 u$ _
6 H- ?4 h, d" t2 z, {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.' V9 I; y- n W3 e" h
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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.) h0 e* z/ c8 U/ b. Y* u
' ]# T9 Y3 w' ^# H* T"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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