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Gas prices are rising while crude prices are falling. What gives?7 P& o j3 x a3 \
Published: Friday, January 16, 2009 | 5:11 PM ET
$ O3 [- L G$ r: a7 FCanadian 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.- n9 Q/ n' }( C1 E# D6 V. l
/ \& [) X. I' X& Q7 dThe 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.! z* \* x' d4 z$ [9 O
1 S6 j% y' d d& ZCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.
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* _1 Q7 h8 c X) A( @"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.0 U) j! J% A& b0 D# C
x0 C% b7 b0 x/ l/ K; wBut 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.
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, r# R& ?: n) E4 q0 G"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 74.2.1 | p. J- v0 X I1 W S9 I( _
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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.5 c% r" I4 S3 Q, G7 J
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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.
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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$50 a barrel a week ago.
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5 d( D, D) J# I7 D9 H0 R# z2 j6 D"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary./ ]0 \1 {' @7 \1 z
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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.
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0 H$ [8 ^1 |* W; C1 JBut those oil companies - private-sector players in a free-market system - also want to turn a profit.
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+ P( h1 }) Y. \& |9 i"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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+ N% z2 b+ |7 D8 _2 q E"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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/ W2 I l0 p% M) r+ o& o. M! ?+ z0 KAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.5 a& z# ]; X8 N0 D$ J
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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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/ T/ ^. S3 j2 F% ?0 |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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9 N1 {! _) A, a( ?. e( r* R"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.", `, M2 R. f! \0 D. ~+ }
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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.1 [1 j2 e+ B0 s2 h3 K% t
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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.' @ ~& p( W' T9 q
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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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