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Gas prices are rising while crude prices are falling. What gives?
/ f. n/ N) g6 A+ nPublished: Friday, January 16, 2009 | 5:11 PM ET7 {) \/ c$ s2 d& \% C
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine) ]6 n. Q8 h- H4 b6 n
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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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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.7 }% }- c. \0 k# r+ a( z
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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.: Z* k6 F3 x' C! D
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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 $1.40-level gas many Canadian cities faced during the summer.
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! Z& H7 t x" h8 A! Y4 W Q! t- q"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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% |& E% @3 T# u7 v"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."7 A+ f3 s. x1 K" _3 f. z" d
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In Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.
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$ Q7 W+ F2 O, {% o3 C4 KVancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.$ F& i2 r4 a1 i
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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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4 K; ^1 ~% J# T- R& SThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.
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3 a! Q/ w! S5 \& ?) k( ~Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.
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"Without question those gasoline prices are going to be the highest they think they can get away with without their competitor undercutting them," said Hirsch. V- `) u# V9 B: h
8 h% H: X$ d1 t: 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."! {& N/ W- _) m5 Q$ }0 m H3 E
" y3 h4 n, I1 M& M9 C/ S6 Y$ @$ `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 $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said., g, v- N* u( O: Z- j' H' [/ R. Z
/ W7 O( N, _+ B `8 J' WHirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.
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7 G9 S" I; v" j _& Y# B8 @"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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( t; D( B# _0 q- t: D6 T* ~; T! I"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."" s' @' a5 e& ^% r2 m, v, n6 u
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But Gasbuddy.com co-founder Jason Toews said he sees gas prices going higher than their current levels because of a slowdown in Alberta's oilsands and expected production cuts by the Organization of Petroleum Exploring Countries.! s- e* D$ {; {( z0 u$ E
, S# { D9 N X a. F7 T"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.+ k3 r; j2 Z5 I% ^/ C' M
4 w/ X8 k5 ` C5 q j3 t0 S"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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