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Gas prices are rising while crude prices are falling. What gives? C& b! ]: X' B4 u7 E
Published: Friday, January 16, 2009 | 5:11 PM ET+ F% e% S- `. ~5 Z4 Z7 q! D, K6 ^
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine
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+ N) r6 b7 E/ s. e- fCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.1 p Z5 v+ S7 S
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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.$ v) z; ~' i2 O" ~6 S+ z, z
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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day., g) d4 f5 H: o9 y9 `$ g6 [; w
$ F2 e9 y/ b( f! s: o+ m" z"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./ h o7 {# F: T! W
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But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.. Y) j8 V' `# B$ H4 S9 G
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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."' h: a; h, i& F& A5 n- K
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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." e. k; t% Z5 ?( e }
- P. c, Z( `$ H" S! m, _Vancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.4 b1 v! l- }+ D
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The price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.3 U' I$ S# \$ T9 w6 B5 G3 @: O
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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$50 a barrel a week ago.
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5 k$ T6 u" X" R8 S3 S$ G* Q"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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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.- _. Y0 S, ~6 y- ?! ~
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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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' H7 s. S0 [! R" \5 b"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.. S4 [. }. t% }5 ^
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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."9 g# D; u0 r% L" G" c: w5 U
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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 $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.. a( E. v5 L" L
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.6 n( P1 |+ h6 h
5 V) F$ z5 \. p- e"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.2 y1 B J0 z) ^ n
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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.6 O1 f0 b4 `! \+ W9 \; b# y
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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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"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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