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Gas prices are rising while crude prices are falling. What gives? j5 Q) |! c$ C+ X7 A) R
Published: Friday, January 16, 2009 | 5:11 PM ET' F! C* a& a1 @" f+ m1 P! }. @
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine6 e2 t5 I- {! w9 ^% u9 u; B! Z. _
+ ^3 R7 C4 D0 s+ }1 b# BCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.2 a J5 ]5 q! I* A
0 r0 A. I6 M2 ^4 Y9 X. ]$ K0 LThe 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.4 [+ p* P; g4 b( f' [0 Q
- G: S9 m6 N1 I5 rCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.
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6 @: ~3 H& L% u( y"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 $1.40-level gas many Canadian cities faced during the summer.. h3 p, {- Z/ c) e
% f! Q; w3 q3 P2 Y$ D6 Y"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.8 k) H& v4 n' @& F' s5 a
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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."
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/ s6 y }7 z1 k. G3 J' nIn 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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* |: F0 M# ~% I; AVancouver, 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$50 a barrel a week ago.3 A* B/ V" ]3 V3 \
% I4 B. t$ q( `4 O"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.5 T) i% e: I! m0 S6 E
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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./ l! [3 l! u; v/ m5 J
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.4 J8 P( o L3 y
9 B- g! a8 n/ i2 U/ e- P"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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" x( D& Y8 v. R% U. }5 g& {+ f0 LAnother 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.
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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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) j& O; Y/ E9 @3 a/ k% ^ b0 } eBut 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.
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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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