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Gas prices are rising while crude prices are falling. What gives?- j6 ~' T% G* G! ?7 F
Published: Friday, January 16, 2009 | 5:11 PM ET- W4 @& H- o$ C3 A, L
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine: F* m! b; x v2 U) Y# A* N# }
5 v$ h7 E8 r1 L- M [* b$ dCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.5 V% t+ T) u4 t, ^
! i* j) L9 _) S% W- XThe 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.3 P) D7 R. [0 F9 R9 [3 L: _& M- g
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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.' E4 M) V1 z5 j4 T9 a
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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 $1.40-level gas many Canadian cities faced during the summer.+ D3 B8 B0 ?! o
: q0 ~) R/ q9 p"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.2 Z* S' {- [' K: ^; t
4 {8 u% F; @0 Q$ h n1 }* w: X0 p1 N"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."' K; o4 U$ {3 x
! `! V+ f4 K: [7 [ }8 |3 Q2 x/ k" V7 F3 EIn Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.
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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.
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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.! @' p7 k; B+ {8 o. I2 R0 M) B
- h7 i6 S5 ]. @8 O3 {4 v8 G- O& P* K"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., |' w @* e" {% \0 v
" o j4 @. i1 h1 p& Y. IIndustry 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.
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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.
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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."
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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 $42.57 on Friday.; G+ I) l7 C8 Q
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.- s' @+ k1 N- Q" \
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.
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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.0 R. L9 r9 s% V6 s* R x3 Y4 }6 m
4 R7 @" o( }9 `, W4 i8 e- v"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."- @: g# A5 F6 H! s
* h5 ^7 o) k# N% u2 PBut Gasbuddy.com co-founder Jason Toews said he sees gas prices going higher than their current levels because of a slowdown in Alberta's oilsands and expected production cuts by the Organization of Petroleum Exploring Countries." @6 g: i- m \7 v% V# S
w& h0 D& y" B"With lower supplies of crude oil in the market it's going to push crude oil prices up, especially if the economy starts to recover a little bit," Toews said.+ |; h" c3 i: R% p$ \4 `! j( @
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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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