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Gas prices are rising while crude prices are falling. What gives?) |- x0 w: |, c- V5 L& S
Published: Friday, January 16, 2009 | 5:11 PM ET
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- |! j7 \" y! v# s8 y; t7 tCALGARY - 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.
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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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. }) w' M. S) Y0 P. S. R"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.2 O p, ?+ |* S- Y
+ L. F0 w: t: E3 q4 W# g' {4 x, CBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.1 X' @. {; h3 @+ k, {) @! d0 g) X: S
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"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."" S/ c& h+ F: q& q) @
( l, v8 `+ d$ d$ }1 S/ D3 ?. W. oIn Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.2 T3 b8 A/ _4 T- G' d0 q1 L0 m" t8 e
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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.( b# g. ] H, q. T/ k+ X7 D& H# s' l
2 x- q/ F! p: m' j+ C- Y3 KThe price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.' Y/ c1 q, m0 H$ r9 I* w" g
5 A- |8 K( h c9 f4 j: @- GThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary./ g/ a" T/ t# K' z' [
: ]8 F2 l Z; z! fIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.5 ?8 M) F$ o& s5 f% v! |
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.6 d1 D w# P* W' T% Q& s8 v
9 v" v$ Q6 F- 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.", c$ a3 J( \4 Z) t
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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 $42.57 on Friday.. T" f+ k4 N" c. c; _: B! k* n$ g
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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% j6 X! D. }3 T& p s
4 v8 j1 c! v3 r/ r+ V1 K8 v5 qHirsch 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.$ U. I. ~ ]- J7 S. Q: \ q
! q9 a E# `& f. h* u- V+ I7 r3 R M"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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$ f, j& Z( I9 { z- |! f"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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% e: }3 @) D6 E8 L$ A"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.
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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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