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Gas prices are rising while crude prices are falling. What gives? p3 U" A! f( R( j) `
Published: Friday, January 16, 2009 | 5:11 PM ET1 K' n( W; i* Z$ e5 [; F
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine( H$ t+ _) q- [) O( v- u
3 W5 n6 e V7 qCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.7 g1 c2 i G) S7 `! W
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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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+ D) | s. G8 j$ h w1 tCalgarians 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.$ P5 W' N4 R! s. V6 X
) L. l" F$ t8 nBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer./ J. M& a& |. \5 M9 Z
/ P9 j0 e- W& W! r' |"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.6 L/ } e+ q5 ?
. U7 m) h) g* ]. K) c7 s"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."
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In Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.3 w8 k5 X/ P/ ~6 ]5 a& H- _( O
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Vancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.
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$ M8 q$ j, Y. P5 q' W5 p9 u& QThe price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.: z1 ]: K3 l) I+ b# S6 q
& R w1 t6 T) U9 w% a, [- 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.
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"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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2 u A! }7 a E7 j2 ?Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.6 @6 h3 i5 O, P" V7 I
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But those oil companies - private-sector players in a free-market system - also want to turn a profit., Q+ `& g# v! `3 d0 T( O
' d, c- E- g0 ]/ J"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." v2 ^8 a U' Q8 p. \8 ^
! W0 L0 V' i6 V, [1 @( r: z"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."! ~& i3 A8 ?, _1 D1 R
2 u. R% m) s4 n4 u2 H, `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 $42.57 on Friday.- ~- F2 a# w# l; H, I
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.3 c: \% b# `' O7 U8 F+ A; b! N
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.) }- \+ e( ?. @. q
; x+ N. @5 {& g: Y"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.7 v ~( M+ C8 i1 P4 _* ?
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"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."6 v! ]. ]- B0 Q: l# W
b2 R9 X* p; {) tBut Gasbuddy.com co-founder Jason Toews said he sees gas prices going higher than their current levels because of a slowdown in Alberta's oilsands and expected production cuts by the Organization of Petroleum Exploring Countries.+ z" k8 H9 ~ H4 s$ ~
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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.: e0 u* t# C3 y
" Q4 q2 j! M3 a, d0 K5 Y"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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