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Gas prices are rising while crude prices are falling. What gives?+ `# O2 t4 O( q8 V/ `$ L) _6 R
Published: Friday, January 16, 2009 | 5:11 PM ET/ y+ Z4 K8 a7 j3 p; G) V; S
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine( R1 A, n8 p1 }: X. Z& c' Z/ h4 J1 ]
& @) y7 N" N. t" Z9 g3 f+ h2 }+ OCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.
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5 ]4 k6 [& j- e) WThe 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.3 {0 c$ h4 [' d- t
+ l x5 N! {2 M* z$ g- U"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. F# i M, g+ D' q, J0 j
, y- r! y; h+ |; JBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer." k5 M2 U; c; T! m
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"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."
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In Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.( c; B9 H$ L) q3 j
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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.
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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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) W3 h* `, }2 S# aThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.
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( S# b- o3 t( k$ C' yIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province." r! V# \7 d) e2 ^
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.9 M) E5 `% z6 ?6 v2 q. r
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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.+ h$ ^: b2 u. w x
3 W" Y# C6 O3 t7 U6 L' D* w"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."% S3 H) h- G# ], ?( ^
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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 $42.57 on Friday.% V# T3 f' b; ]5 ]" \
# I; L5 d% m' c9 P"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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+ b' f" g& `1 s" V2 @, R, h) FHirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.* J& {) J( R y! {8 P. m
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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."
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/ ~$ Y' i1 A. L) nBut 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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"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.$ r5 O# u4 q2 @+ _$ A2 a
" M) y8 I3 F* ]4 \( j# l"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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