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Gas prices are rising while crude prices are falling. What gives?9 k, w: Q$ L: M5 p! r
Published: Friday, January 16, 2009 | 5:11 PM ET
, g1 x! t8 a2 f" I. dCanadian Press NewsItem/NewsComponent/NewsLines/ByLine# B" W8 N8 A- A' L+ \
* Z1 p" `/ Q1 X# }0 r2 \# fCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.7 h0 U1 p1 r& y" ]7 M
0 W) i4 f! R; 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.3 W3 Y# _" ^$ h2 _0 S* Z! r+ Y
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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 $1.40-level gas many Canadian cities faced during the summer.6 `# E% @/ u# `$ c& _ T+ k! P
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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.. K \5 w1 Y! q
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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.2 a h( r6 x0 k; o% A+ L- r
# b2 B1 B& Z1 X& Q- [9 A% mThe price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.4 s4 w; p2 l+ `( Q8 i ]; v
2 v: ~9 [+ z! ]0 bThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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/ a/ p" H# }5 O9 _"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.1 T0 G1 L" q2 N3 F. O
/ [* b6 e4 M1 }5 k# ZIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.1 a1 P0 P9 e8 ^. C- j
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.# Y; B( b8 }% _2 w: k4 k- ^
( j3 z; m# c3 U$ f5 g"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./ i: k' {3 T7 [9 u$ H2 D
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"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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, b. \2 T5 o! U* b r9 Z, m" Z6 S( OAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.
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3 ?9 V( m5 }. I"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.: R* ~+ p. C! G0 ~; N) A
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.3 _2 B% z6 o! n: ~, Z9 C
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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.& l) P: q4 l+ s3 c) v! a/ }
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"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."
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But Gasbuddy.com co-founder Jason Toews said he sees gas prices going higher than their current levels because of a slowdown in Alberta's oilsands and expected production cuts by the Organization of Petroleum Exploring Countries.. g) }% h! D/ N0 A# n9 e/ Z
( } X1 p) ?; R, u"With lower supplies of crude oil in the market it's going to push crude oil prices up, especially if the economy starts to recover a little bit," Toews said./ N8 {3 n) q5 q0 x+ `$ l& N" l3 u" q' l
3 }$ {+ m* f) m"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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