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Gas prices are rising while crude prices are falling. What gives?8 s- f/ J6 O: e% d1 V1 ^
Published: Friday, January 16, 2009 | 5:11 PM ET W4 T' _3 Y6 Q9 F
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.. {6 M4 J( W! M8 x; B6 m
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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.3 N% W w6 \: U1 w1 b) g7 G9 S
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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.# d5 D+ D% m5 ?& j3 I7 |
6 V1 z* W* {. m5 l: j0 PBut 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.
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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."( T5 m) O5 z8 x4 Q* \0 n
+ y9 n s5 y# T2 O! IIn Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2. w" e( C: @: b. n' o
& K! t2 i+ P( u7 w) n RVancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.0 O" O" @9 _: Z
! \& N5 s0 d, o* B" e0 ]The price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.+ }+ Z8 k S% I$ d
. I y! b; m; I! \+ Z9 ~6 ^The February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.4 _$ j/ w1 [% C( I
! W! }8 e' W2 q# W7 j% g2 Y"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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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.0 s9 K/ a4 {/ c9 C" s: i$ @+ L
1 L4 k0 C% O# u0 M$ H- O4 oBut those oil companies - private-sector players in a free-market system - also want to turn a profit.& `& m0 ~) J6 u1 T6 _" G% R5 D" U
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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.1 n5 W7 h2 w0 g: u! g1 H# p
! E( o3 H* R% v& I2 E: ]2 a3 Q"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."0 n! }7 o; n8 V* g6 C& |6 @/ k0 j
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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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T& s3 ` S' _" d: X1 h. `"(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.5 z3 `" m0 Z4 d) S) w+ e# H7 N
2 L0 G% a1 Y( X8 c4 j! }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." L9 F! V# o; _8 _
6 v0 N" s0 k& ?! C7 F& p( D7 G, q"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.1 Q7 T3 L. c a4 ^9 W8 ^
$ t) a( e4 u* {9 h& `1 ~"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.. E! `+ t8 \7 q; n" Q
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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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. p. w! O5 u4 M' p7 l; R6 A"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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