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Gas prices are rising while crude prices are falling. What gives?% f9 f8 f) b8 s( \% p# b) @
Published: Friday, January 16, 2009 | 5:11 PM ET* v) _5 S0 P& C( D& B `
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.; d! c, c& U* c4 W1 n" K( G
" ]4 D, m8 g- q; KThe 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.' v# `$ K+ a6 F6 n
( n$ Q' I2 ?; k7 Z: O1 ?Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.5 {1 S' U6 q* z9 p Z
" O7 q1 c: b/ u"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 $1.40-level gas many Canadian cities faced during the summer.
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"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."- A7 e) q4 _8 O% h$ r/ k
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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 74.2.8 V) j2 K6 n; q+ p. s, v
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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.3 L* x! _! u" y+ l0 @: m
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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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The February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.2 Z4 q9 L' D; m, t0 w
# }2 g5 d7 P4 a; GIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.: N i$ o9 c n, r5 \: V
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.4 r9 b4 t8 K E6 w( ?
. J: p! S) Q( _! @"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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1 r( J3 B& j8 J$ ?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 $42.57 on Friday. y, Q& [8 m6 | L9 l, D" @
4 K8 A# x( x0 V# c5 z e7 H"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.
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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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8 H7 p$ x7 ]9 @& ?; O/ r"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."2 U S+ n" x: f. F
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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.* C7 i( H1 p) B
4 C' e( U% L% D7 ~' i"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.* P7 R. E0 d* T7 t
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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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