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Gas prices are rising while crude prices are falling. What gives?
' W+ z' S! v! q- KPublished: Friday, January 16, 2009 | 5:11 PM ET S, B0 O5 o l1 M* B
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine0 Z. @; A3 `* y
& T w7 R5 R( X$ R8 D, ICALGARY - 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.+ @$ ~: ?) x) T
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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day., U& Z. u" n/ Z, |9 w" G X. m) @
) A1 y# }' [0 j% v"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.5 W# _# v2 i% H/ I$ \& `
2 t4 Z1 L0 C/ ]9 E* d, L9 HBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.2 R3 v4 K9 n/ E, G/ \% G0 ~% W
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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."* e8 f( U6 G0 `( s5 F% t
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In 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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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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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.
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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.0 p3 U0 L' z# p) o
6 d% I, C8 X/ K6 @/ h: lIndustry 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.
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- T5 E/ j( T+ u. b7 B% M8 u2 D& F, E4 z"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.", F9 e+ e r1 J+ w& t4 m
; X5 E7 C7 S. \0 Q0 S3 G0 z! |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 $42.57 on Friday.
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- x$ w- B- }1 m0 @$ ~/ U( }"(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.' F% Q- M- w& o
2 i" s: e& s2 y0 ?9 w% o& B/ K/ @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.% P7 H6 c" p4 x. ]) J
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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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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.
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3 i: s! J; y I9 U"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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& g8 s) m1 t3 W G x$ g"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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