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Gas prices are rising while crude prices are falling. What gives?7 A/ _. Q% [$ V0 x
Published: Friday, January 16, 2009 | 5:11 PM ET$ d. f! B: X) K* @
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine
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! Z5 ] c( H$ m2 S3 j) c3 QCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.
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- h" o& j5 o; kThe 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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% N! G, b- E/ _Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day." Y" N( Q$ O: v$ c7 ~4 o
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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 $1.40-level gas many Canadian cities faced during the summer.) P% R/ i- s$ v
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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."$ z6 f. w r/ R/ `3 c7 y
V/ M1 h, O( @! G- ]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.) O- D0 l# E4 z9 l5 y
6 C2 c, r; A# e" f' [* \: ?Vancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.: b% k, {) T7 T% E
1 ?: J$ \+ t2 m, C4 a# qThe price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.: H8 K8 H! n- R( p& L+ Z
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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$50 a barrel a week ago.' J( u% y) @" g5 b, u, z
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.2 U; D3 A. l7 N7 f! x
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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.( N7 R$ t0 M# {+ J, ~
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.; t/ r: q1 G# [6 f+ }
) }) d$ z" F' x; @+ \- }/ E( J2 a6 Z"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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3 C8 n( C' b( E& r8 a"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." D, r! ?( B6 |: Z9 U: D* b
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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 $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.9 m2 ]; V+ d/ _5 P/ O7 p% ]: ]2 C
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.
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) _- n0 ?7 a# g+ i"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.3 y* x' X1 `1 ^' w3 f8 t
2 `$ z8 U& T% X0 s0 ^: ~& J"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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6 {1 I) v# F7 I! jBut 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.0 E* t4 Z. ~: _" P
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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.
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3 z8 ~6 s2 ~- `, G"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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