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Gas prices are rising while crude prices are falling. What gives?( e( x: U8 B4 M, X, _* U: R, m- F
Published: Friday, January 16, 2009 | 5:11 PM ET2 \- d% ~) K1 W2 f( q
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.
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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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"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.0 r; P: \0 Y3 ^" ?) N9 L
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But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.
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$ ~& Z4 G8 z' l+ H% n _"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.; f/ ]" ?" B" J9 v$ d" n z4 r
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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."+ y% R+ x* G8 | `0 s7 N* i
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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./ |: G3 E' Z& a3 q- B, M/ h
9 \7 j" B% c* ^# @: X$ w$ s7 GVancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.# e2 Q9 w% L/ y& u2 R
# a* o1 ]5 ]; Y: u5 HThe 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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4 |: y* ?5 _9 W! f# bThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.( w* m% f. P7 w" C
/ e3 S3 ?' i0 ^% @/ J$ ?! i" x# r"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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( d) Q/ ~" F" f/ n& O( RIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.7 c( Q. R, C) D9 ]) d: w
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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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. t4 B: ^' A! G- r4 } g"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."+ u& f# J' D/ x4 O- L! B) z8 G
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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.2 n! S+ p( Y9 g! ]
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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.2 l2 E0 ^! j' k9 T6 q: o" p
; {, ^ f) D* E+ [) v9 v7 i3 u"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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, \4 u. D( f* o4 | O4 O# 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.5 \6 N0 w( T! ^2 y
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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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