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Gas prices are rising while crude prices are falling. What gives?5 s7 s7 ?7 `, X& S: I1 i( u
Published: Friday, January 16, 2009 | 5:11 PM ET
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CALGARY - 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.3 d5 H& D* R! r' {, I! W4 ]( x" n
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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./ o6 h' q+ y6 g/ n) R0 |) z ~* K
' O3 u u. X$ z4 a* R8 N6 a9 `" u, tBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer./ k9 i4 Y5 @2 T# {2 y2 w
4 e! U# O! A: y4 |"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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1 o6 \. E) a3 ~& h, @3 t7 u5 |"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."# L2 v/ m* F+ ~ S$ t
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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 _8 ^5 H# }( s& {
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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.' k$ o/ O3 v$ g \* Z
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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$50 a barrel a week ago.
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{9 K5 j& F% e/ T Q' s"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary., w6 ~% j9 W. Z7 T$ \. n
8 U g! h& V7 dIndustry 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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( n1 A) M4 a6 B% V( o' n( J. xBut those oil companies - private-sector players in a free-market system - also want to turn a profit.
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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.
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- v( {% s/ p1 l N! }"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."% R' C" @% i+ E }7 i, X2 y" P4 Y
5 z4 Q+ _- o8 I' u3 `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 $42.57 on Friday.- s, n _: a6 W3 x1 u) d
# t( H. H7 t, Y. y" l"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.
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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."8 u; P$ P/ `7 {
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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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/ k W4 ^% S5 e* ?# F: ~6 e, l6 m"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.. Y( [$ ^$ P& H9 ]4 Y
: m7 w }! f$ R& ^+ r P* O"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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