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Gas prices are rising while crude prices are falling. What gives?! @) e) A% c* ]! N; O
Published: Friday, January 16, 2009 | 5:11 PM ET" n. E* h, c' m7 L# {" Q8 I; [
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine
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1 ^8 W# R0 R) z+ k" P; Z/ I$ gCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.
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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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3 a) a+ D+ f( e9 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.6 } l$ F$ ^% w. L" m! m, v8 O
' p) r# i7 p& K _But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.4 C9 H; U# l( a3 j, _" q, X% ~
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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."; k" M. \. b" [
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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./ y" E8 x8 V! E' V s2 d) b/ o0 A; x
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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 $147 reached in July.
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$ P& C' d+ E' G/ [ EThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.: Z* ^" m; d# F7 I1 O/ j. h
/ t5 p0 q$ s" y' ^7 T0 kIndustry 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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But those oil companies - private-sector players in a free-market system - also want to turn a profit.: V) l* v0 `1 u* T5 }
- o' O' q- O' x- G% }6 x8 \"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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" ]% I- B/ U! k- i- }6 z2 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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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 $42.57 on Friday., k3 Y: D- D& j8 x" p3 a
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.( e8 C, E' K- r! @! k. m
9 l+ `# g! j: HHirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.% x: |: n+ N/ O; H/ P9 ^! C% M
) D) n E4 E S. @$ [( |"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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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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"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.6 G4 g: ?2 p1 H
6 Q1 J* _& O" ~' R' Y' 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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