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Gas prices are rising while crude prices are falling. What gives?) y6 ^8 J6 k, _' L2 Y7 I: H
Published: Friday, January 16, 2009 | 5:11 PM ET8 }) j8 _# {6 h, u: v ^
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine
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2 u0 J- {) \! }. p' o. gCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.7 D* K2 P3 z) W
/ g0 U7 z3 T" v5 I B; k. ]( `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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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.
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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. S( k6 u# ^# G( d% E9 q9 O& w' f
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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.
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" j- \) B" t% }: Y"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."3 I3 j) N- o- }8 K3 }' Q
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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.' K$ U/ K7 t" ?0 `- |
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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.# X: u% k+ b8 n' Y) b. m8 Q* ]: s4 C
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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.' N3 N k* T& X& O3 f0 E
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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$50 a barrel a week ago.: j" e; a/ l+ Y' V7 k: Z
+ J. ^2 v" b) F2 ?: L"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.( ^- D& T6 q+ |1 t) P3 S: T7 u+ T+ {
5 D+ X1 j3 f* f1 f' GIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province." `! }) ?9 X* e# m
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.9 r8 y: O( V$ ^& ^& u! v
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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.* o' M3 E6 W' G$ {
' W2 I2 Q% o$ R' k: 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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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 $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.* _. F i" d" M: x+ I
: c8 a0 n0 d% M8 _3 j"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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" G9 n" t4 H& O4 J3 L"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."5 A- ^* l& u+ J& `/ ?, h2 H6 X
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But Gasbuddy.com co-founder Jason Toews said he sees gas prices going higher than their current levels because of a slowdown in Alberta's oilsands and expected production cuts by the Organization of Petroleum Exploring Countries.
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6 c8 Q* ^) v3 s1 T! O2 b9 h"With lower supplies of crude oil in the market it's going to push crude oil prices up, especially if the economy starts to recover a little bit," Toews said.! g3 D% q4 D7 q6 o; r6 s
8 M8 w0 T$ P' _. M$ f"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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