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Gas prices are rising while crude prices are falling. What gives?: f7 t6 }! E* f+ ]* x3 v9 @5 q
Published: Friday, January 16, 2009 | 5:11 PM ET+ c& J0 J. C* F7 j0 J/ s7 O/ y& F
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine
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CALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.7 o5 m* S& z$ o- O' _- e/ O
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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.% _6 ~; s7 w5 w( p! c2 Q
, D: u+ E$ |4 I k& jCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.9 J3 S- l3 q/ i+ t }) ?
5 M! l8 m2 p S9 e, t"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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) L" K' z9 b# N" iBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.3 x( m8 C$ p% `$ v' L
# o: D* P% q# C: G9 a6 J- q8 B5 v"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.) C$ e& Z5 m; r( X8 G0 }
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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."- f& [ {) l1 ?; `- _- i
: C3 n3 F& B, b( A: k8 w6 ^2 VIn 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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6 d: z0 s J: ^5 q) D8 zThe 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.. ~0 v' S- S9 c C
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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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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.
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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 $42.57 on Friday.5 h+ K, {! _/ P1 _
1 H$ k& g3 C5 h, `"(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.0 j1 Y" Q1 p* G/ k3 H$ ~
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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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4 M; v9 A" M( s- y9 q d: t a"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.( W) e z p7 [ z$ l
# f9 k K( u5 L"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."
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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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6 m: |6 Z: }+ U2 ~"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.+ T8 Q! i5 w* V4 B% G0 H6 \
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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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