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Gas prices are rising while crude prices are falling. What gives? T1 n& i' a1 r2 y& v$ d
Published: Friday, January 16, 2009 | 5:11 PM ET
" x4 b/ l! @& oCanadian Press NewsItem/NewsComponent/NewsLines/ByLine+ l# D' ]: X$ o2 \9 U" |% g) ?. B. p
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CALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.) F- _# s; ]. t/ P& v& O, D" w4 B1 ]
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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." g5 L& V1 V Y
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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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6 \! c4 {1 I f"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.3 L% K8 K9 j; }& |- w# }
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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.
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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.! D, T: x# u& t1 k( f
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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.", N6 `9 r- y2 S1 P6 ~ d4 g
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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.
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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.4 \5 n. f a( W, H8 t7 t' b8 e3 D
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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.3 _* F1 u% }5 Q
6 |# F+ I% h+ ?& pThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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. j: W+ f, m& H9 ^6 e"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.: {, Z! M/ X" z5 J
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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.
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% h5 H' I8 ]# K3 oBut those oil companies - private-sector players in a free-market system - also want to turn a profit.$ d( T; ~' N$ U7 n0 U
% I" u% P! S- e) d7 _+ O"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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p( U0 z3 L1 j7 V* G+ w"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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- }9 B) e- P5 m3 \; _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 $42.57 on Friday.
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9 [, @6 v$ z( X# S2 f n"(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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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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! U f( ~7 g' S+ \"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.; s0 O" c% ]4 \- p8 e
$ A3 p, ^2 {. X J- h& N"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."4 a5 J7 j; [6 H. V. s8 J
4 F, ^+ i1 B+ }$ ]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.$ p1 K+ f7 |7 M- L, x
- g& b( b# z b) R"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.4 d$ ~) y+ `6 n8 @+ v$ Y
& l- J5 ~3 s2 A7 f7 O5 H"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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