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Gas prices are rising while crude prices are falling. What gives?7 _: H7 o7 B) q+ i0 s$ w
Published: Friday, January 16, 2009 | 5:11 PM ET' C( A2 {. i1 q
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine
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- w. |' Y$ ^5 r3 W$ s% XCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.: v+ v3 W9 N7 V8 C
0 d8 w% e4 @. `4 Q" O6 wThe 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.: x8 d' L' c# }' q
. Z0 H3 U6 K' ^; tCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.
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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.( w B, l# O. o; ?1 x5 C, m2 `
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But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer., h$ T& d' @9 X9 m4 c* t
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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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+ b% A, N* t- V5 @$ M @! `"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 X9 T4 Q/ A G; T2 `: p0 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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Vancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago. r! h% J8 q T0 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.
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2 n0 j( H/ K5 ~. m( C1 mThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.) b5 V7 s% y3 z% ]3 w9 H5 h
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.2 j, _2 w8 f% _( S. E: J
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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.$ p2 t/ B1 H3 @6 o# u7 t
\, M9 [( p" W9 BBut those oil companies - private-sector players in a free-market system - also want to turn a profit.$ @4 n3 ~* j3 C: v7 W
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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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6 Y/ }$ [9 C1 p E* ~"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.
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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.
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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. X5 e* {9 b/ B: j& m
8 c. H5 ~& n8 z, T# x) @- @"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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5 H3 G+ U1 D0 r+ j. N1 q"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."5 U1 ]7 `9 V& P5 q% B, o8 H% G) f8 ?
/ w( a9 t. o; D9 z& E8 w4 H7 @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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: f: M# R6 I, [- q1 C4 N"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." v3 B& u! Y3 Q4 a
/ E# f1 h7 E/ O! h5 b: q: n% t"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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