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Gas prices are rising while crude prices are falling. What gives?4 n: z+ d0 @/ z9 \$ q8 V
Published: Friday, January 16, 2009 | 5:11 PM ET
! f* ]; \( Z) ICanadian Press NewsItem/NewsComponent/NewsLines/ByLine# I3 }! F, g5 D& P
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CALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.* D: O; `+ m* b* g* Z" k6 j* N
) b7 A. i' @: D. DThe 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.
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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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" [5 i [' F0 F! FBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.4 z$ {6 l+ b9 c8 @% s& s( V9 g0 d
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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.1 N% G; x: [/ y3 `
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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."
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: P! W( r/ q7 M. d, w: j$ NIn Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.: i$ T5 g x0 Y; N) F1 Q( K9 U/ C5 Z! b
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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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The price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.. y* Z4 e. c0 C
9 V9 P" N: d' A; x) K$ V) Q7 C! n+ LThe 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.$ u% M# A o: o$ X: y
/ y9 ~( j6 \) C1 O"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.& C5 X7 ]9 g; X5 Q
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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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7 V8 H# e: g+ B6 hBut those oil companies - private-sector players in a free-market system - also want to turn a profit.
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$ t# \! u6 x0 \7 V8 m"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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* A! P" Z% k( m2 c" z# E"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."
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. u0 y' S) J& v) j4 ] p; |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 $42.57 on Friday.
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9 l5 o( U& O4 P"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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. ^# \0 z. f& \2 @& RHirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.
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6 Y D( J& g0 Y: W! w% T+ t# F"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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$ h8 g% {4 ]0 d4 T( k/ 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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! K; {( h: S% I& B5 F! @; P: ^5 rBut 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. ~; k! {% A5 k$ c q1 Q
$ `0 d4 p0 T0 s0 H; ^8 `% h"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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