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Gas prices are rising while crude prices are falling. What gives? S$ E0 ~( B8 Y) R! `5 A; E
Published: Friday, January 16, 2009 | 5:11 PM ET( T t3 B9 Z) f6 d0 `) `% @ q
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine7 B: `2 j) n e
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CALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.* X, X [ |/ V: [
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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.* P. O7 E. o5 w/ K# r. C' O
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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.# D8 x: T% j0 Q, F4 d8 q8 e: j
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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 $1.40-level gas many Canadian cities faced during the summer.. |+ c) D4 v" J2 a
! b% k& E+ V6 T2 A; D, a! |"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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. q7 k- Q9 W. ]- `4 V"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."
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, t! s- h% t& u$ fIn 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 ^" h* Y% n% G0 L! ?/ z; j: 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., j I1 _# s& I# g
% q- W! Y4 f+ }( E8 UThe price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.+ O7 v7 `1 W' `0 A% E6 h
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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.9 i9 H9 d& q1 t& V5 H* |4 {9 t
1 B, x0 C- {6 E1 |9 r: Q# O% L V"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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- q d9 P, ~' \3 K6 u) nIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.# F0 M0 E7 O3 ]% C; e7 x
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.2 `# l* `8 r" a: L9 r8 \ X6 X
+ S9 y8 v+ V( H& b. a, X"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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"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."7 X- c6 E/ |# |: F( P
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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 $42.57 on Friday.9 M4 j1 I0 b; \. M9 \% P- Y
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.8 R/ r; r9 ~, I8 o) T
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer." m' C$ e; ]( W: a7 K5 d
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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."
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, \3 p: ^+ ?( i$ ABut 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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; b0 P' k& C5 A' ?/ [5 B2 w"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., y6 T9 ? y; O8 i
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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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