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Gas prices are rising while crude prices are falling. What gives?" r- z/ ?: j4 J. r. a
Published: Friday, January 16, 2009 | 5:11 PM ET
% n9 l6 G. n! I6 fCanadian Press NewsItem/NewsComponent/NewsLines/ByLine3 u. T7 t- ^0 A g# j' w( j
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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.1 Y/ |/ H+ C: p4 U0 ?6 f
" i h0 ~* D/ q3 \0 jCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.1 p. a% }( o9 X% @2 ]( A) y
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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.( D$ @0 e* H2 O8 E" P
% O6 t9 [3 c0 A- RBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.8 p- R# R+ e1 j+ `1 ]5 ]% Z! G+ X
# W& w. O. [, e3 \) a"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." U" N" x: V7 H+ X- P9 _. G+ 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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; v: d# l4 O+ q) H- kIn Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.0 y) K0 D Z( C$ I1 |
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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./ t6 V; U( D8 N& K B6 ]) w$ {
6 E5 e. F; b) G* I8 bThe 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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1 C, Y8 D9 C: O7 c6 B( R% c& d2 X) uThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.
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8 k, C$ x3 F8 [+ SIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.) }$ N7 { p8 W6 Z( b
. {& t% y9 w5 o/ r' ["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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; d3 k4 t1 a9 O: m; T& _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 $42.57 on Friday.3 \0 k2 \& C0 X! C* r3 g3 f) l
0 m) j+ G- { T9 D3 i+ N"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.2 K! x/ E$ @0 r8 A" T4 j
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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.1 q4 j. U! ?0 P& d' n
7 Z0 `: F! }. Q"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said. `2 Q" m% ^8 W& J5 c
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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."/ y( t9 @# Z# W8 a$ m1 e
@! D# ? u$ j; o& tBut 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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8 M X% g3 b Q; `% v8 B"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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