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Gas prices are rising while crude prices are falling. What gives?9 i- [* _4 Q( b1 G3 f4 L
Published: Friday, January 16, 2009 | 5:11 PM ET6 m5 Z/ K' k4 A3 |: ~/ ~0 r1 {/ O' ^
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine# Q8 }5 Z5 W' a8 z4 I" J
: @2 ]9 Z9 L b9 {8 k2 H$ L# G, gCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction." R g9 a* ]8 L, H/ N
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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.$ Q& P% T) k( N/ h) H! e) S
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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.5 J# d& e2 D" Z' }! |9 }2 Q
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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.3 p0 z: F. G {! @
4 T @3 B9 S2 s; i( TBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.5 o, `- O& z6 H. c% J$ ^) d+ K
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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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% W4 _% s3 t; @1 ^"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."* a& `8 A m: j$ p
' J- Z1 L, W; k' @% X# n( jIn 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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* o* Z1 N8 ]0 H, [3 }8 c! mVancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.3 M# y! v. A- @) n7 |8 w
" o; J6 F1 \$ m, h+ v6 cThe 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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* s# l+ }: n) t2 Y4 }8 \The February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.2 `0 v, j& ^) F4 p4 Y# @
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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.
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! r) R! _+ M, I q7 ^& B# NBut those oil companies - private-sector players in a free-market system - also want to turn a profit.
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"Without question those gasoline prices are going to be the highest they think they can get away with without their competitor undercutting them," said Hirsch.0 V$ c) \; y9 [$ t* X% E/ C8 [' F
" a/ E" v+ e* M. W, _6 r' w"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." [" ^; M7 c6 O- }
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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 $42.57 on Friday.. Z9 J# Q, i( J3 F+ d
% q+ T( F) \2 F R" ]0 h"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.) k- `; |6 s0 o! m
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.8 n% g1 \* H5 V9 T* d! b
0 Y3 |+ ^. S# t"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."
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But Gasbuddy.com co-founder Jason Toews said he sees gas prices going higher than their current levels because of a slowdown in Alberta's oilsands and expected production cuts by the Organization of Petroleum Exploring Countries.7 R$ J. V2 t: t
8 J+ z" N. n1 @* [4 i; K"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.$ ~ T5 c+ s& j3 f8 x' }" l
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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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