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Gas prices are rising while crude prices are falling. What gives?
. ^' O7 n6 I' m" }' cPublished: Friday, January 16, 2009 | 5:11 PM ET; b: ?& s! n0 Z& z" M
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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6 h! }3 o) |4 C$ [1 @3 `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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* Y9 J" p. m# T/ p9 }6 ICalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.
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( G5 L/ Y( y( N) W+ h) k" i"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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9 u% _$ f9 n) X$ r, ^, Z* F8 oBut 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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, N; R: w3 J! F5 D- l"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."
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3 X) V) }4 I6 h2 O3 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./ P5 W- E6 T5 O5 o
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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.
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3 Y6 Y1 {! p* K3 kThe 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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% |3 e) T& ^, c/ mThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.. A% z0 o/ x3 W. w: r8 C- U; i/ G
% ^3 E+ H& D9 }% h6 b$ P. _) |# ^# 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.4 l+ ?! V1 D- Q: _
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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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But those oil companies - private-sector players in a free-market system - also want to turn a profit. K# u& c" C+ V- t! Z2 L
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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.
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- ]& K: M$ T+ A/ J8 M"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." T* p# Z9 j& p) h& Q! P X
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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 $42.57 on Friday.
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; k& J" h1 L% b' B$ x4 I"(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.0 v; M5 k) \6 ~ t" 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.
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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said." W/ O: I9 Y! {3 n2 K; E4 v" B h9 d
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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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$ t% S5 Y u( WBut 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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* S" I) D4 }+ n* P4 F"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.2 P8 `0 L0 k3 B- ~5 n+ V4 ?
2 f9 ]( y; O/ X9 \"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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