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Gas prices are rising while crude prices are falling. What gives?5 [/ q6 c$ V. w$ i: g" D* `
Published: Friday, January 16, 2009 | 5:11 PM ET
8 P. J$ S: M6 KCanadian Press NewsItem/NewsComponent/NewsLines/ByLine+ Z' A( B) I, M0 O- n( P
: B1 W0 x1 g) X3 L* X+ _ O, L( dCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.; b9 A- r- {- ~+ M2 Z% q* m
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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.# v( ^3 `1 m9 K2 b! v
2 Y8 |; y5 O/ r+ g"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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: O1 `3 v1 r5 Z h) X2 FBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.% d/ l8 b; E4 e5 y/ q* @
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"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."# [* g' Y" ?, c1 [
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In Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.5 T- i* F% g8 @% G
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Vancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.
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$ b) v) _3 v k1 a5 L+ y: ~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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) I; r3 n( n# R; k8 @( I/ X+ ]* ZThe 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.* p4 p1 {9 l% S- H; m
( h" m# B9 k: t2 t1 U* y"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.: C* [- I# O/ E' E
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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.
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.8 V. T- `' G8 C# a& K
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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.8 V! M5 i# f7 y4 [9 k
8 s- y Z% K& }( ~" \) ]. o"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."# x5 C* M6 s- `: t6 h U: u) Y# f1 P
- ?! i: Y" r& X- ~! vAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.; E/ b8 I# \, n
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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1 s/ b. h- n8 EHirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.4 a* q5 P. M& n0 ^
( X' Q7 \4 ^& b( x"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.- t# X( ~ t$ y: d
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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."- M4 f/ x. ^; v: \
+ _% v0 n( ~4 WBut 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.% `% {5 B8 U4 `* Z, l, N8 s
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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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