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Gas prices are rising while crude prices are falling. What gives?8 N) C( a% y8 Q8 `2 Q& V( f, p
Published: Friday, January 16, 2009 | 5:11 PM ET9 g7 o+ b# L7 {. {, Z) K4 B
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine: o5 y, d+ T$ Q i D* c& I
. w/ k; X8 G3 [$ m* HCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction. g E8 K3 j: U/ s* f* i
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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.+ `1 n) C$ Y& Y" E/ K& e H
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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.' ?; X6 U7 K7 b! J- C
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But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.
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"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.6 v$ m: x9 z6 m1 |# l
# X5 D/ b# S( j' [5 W/ p1 {* x"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."$ e/ y6 p% s" d. U
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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.
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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$50 a barrel a week ago.; E7 l0 ^4 }8 t5 }. F. t
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.
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+ s; s) B! n$ k4 q E! MIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.! d5 o% U8 g$ {, s8 D* u
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.; K. P2 j( q9 e; t0 w4 m
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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.8 d+ T/ C1 Z" O
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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."' l0 b0 h, s$ B4 E$ [: 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 $42.57 on Friday.
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: g5 N: R1 g K. X1 w- F- [3 I3 g"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.. A" B! g7 } w F$ y
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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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"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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"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.1 t. P$ @6 U2 B0 u4 ^7 `. O
9 t% \/ n! P- u- \+ }" N# k- _) w6 L"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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