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Gas prices are rising while crude prices are falling. What gives?+ A8 m; {4 e! [9 h$ y! b8 [
Published: Friday, January 16, 2009 | 5:11 PM ET7 N% u0 D3 U# w/ Q; G
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine" q. p4 U$ j0 _* z1 c; {6 @
3 d$ `$ H% e! u$ S( Q ~+ D5 v2 ?% ZCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.
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6 H: c0 {0 y( f {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.) \* k3 n+ p( |$ k+ O X) _
; Z! U Q6 I0 @8 S"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 $1.40-level gas many Canadian cities faced during the summer.
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: m5 `9 c5 Z, w9 P6 u( n"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."
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: G! ~7 s. m% v7 |2 ?In Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2." \! _' ^2 v- O; U$ f
F7 X* O; E! S- d- z/ nVancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.$ B; I; k5 v, z5 H% v4 a
5 O0 ^+ T+ C8 x" CThe 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$50 a barrel a week ago.
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.
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# y4 C" Q5 G( X7 c: ?3 z9 L) hIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.0 S" l8 A( l9 Y. {) w/ r
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.
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6 i* A# W. Z! f, n( J n"Without question those gasoline prices are going to be the highest they think they can get away with without their competitor undercutting them," said Hirsch.
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; M$ X$ y# J. A/ H! `& 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.") E n, ^5 ~* k- @
4 H1 d# M( ?7 X7 G# E4 X. FAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.' a# Q7 v8 b3 l$ Y0 N9 W: s
# N/ V- O2 J# g4 r6 |- f"(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.7 t/ V5 U# Q8 Z4 }
4 s; A# k4 C. E7 x"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.) p1 m" K2 `1 ?5 Q+ F; p8 t
. ]; f2 Q6 o1 z"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.- z* w# G5 B8 s8 X* C
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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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