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Gas prices are rising while crude prices are falling. What gives?9 ~1 P9 D7 G" H7 A- z+ F R3 E3 e
Published: Friday, January 16, 2009 | 5:11 PM ET
( O' w: ]8 ?1 RCanadian Press NewsItem/NewsComponent/NewsLines/ByLine7 n' p1 c8 S9 h$ ]" \) h/ }0 M
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CALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.
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; V" G/ O& T EThe 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.: s/ E8 R/ m' r# H5 z; O6 p& M2 A7 y9 f8 M
( w: C, q9 e& D5 @% K2 ^ k! vCalgarians 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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- h0 Y! L2 F- W: t$ O9 NBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.& ?7 L# t$ K8 y: r2 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.' X$ K5 _; [* Z
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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."7 O/ i! K3 E* M% ~" I
`, [* f0 C/ c8 e/ kIn Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.4 Y6 W- y' e% T- b! X; v4 G
: M( o: I+ B2 @5 rVancouver, 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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; L- D0 c" {3 H% Z7 Y" f8 n: G* }The price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.7 e6 x, M4 v* X- o+ x
8 X5 V& Q0 T/ mThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago., c0 Y3 h" q5 R7 @" x1 r( s2 {
6 B5 R( M4 ~$ t+ [0 G" H5 L h8 Z1 a"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.8 j1 Z# Q/ i2 Y B* X i- q6 j
# u7 ?/ Z/ T; D7 h1 ~Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.9 S; a: @% v$ o$ U5 h! U" h
4 k$ \; u/ j X3 ?3 ^6 ]0 bBut those oil companies - private-sector players in a free-market system - also want to turn a profit.& l) |( Z" ~, m. d4 ~: [2 W
7 K% W5 M' ^' T, F' n2 P( T( z"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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, n' r3 Y) F2 G; r7 W6 q$ xAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.' Y8 O- i' H) [; d! M
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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. i; [! P; Q" l& P2 C$ MHirsch 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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( Z/ n% M. g9 r- P7 H0 b4 G"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.5 x9 F7 C# }% @
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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."8 l( n1 x c) L+ q; N9 Y) l
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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.
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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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1 }) y0 \ y* Y; x"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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