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Gas prices are rising while crude prices are falling. What gives?6 _' S# ^$ E7 R" v- Z c3 e3 A
Published: Friday, January 16, 2009 | 5:11 PM ET5 G1 o3 Y6 I G. D$ E
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine
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, ?( F; i( y! \ F" WCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.9 i- D" x. f5 f* \9 h+ X- T7 u4 r
2 {/ k4 e: E7 q8 jThe 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.) C# N$ l6 k3 [) E4 L/ g0 B
! e. u$ J( c+ j4 v- B, ]& JCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.
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% n$ v: ]2 ~) g5 C" f" X! W: ]( D"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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But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.) M( L6 a* ~6 B, }
2 \. S! c. ]6 J. x"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."
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In Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.
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! Y! y4 T! i" Z! e/ iVancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago., q I6 y: R! ]. J" ?1 U6 S
9 I, L* k: ` e6 W$ UThe price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July., ^9 Y# k& r+ D8 F9 r, H7 d7 o
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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$50 a barrel a week ago.
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$ r1 G; \7 x* h- P' t/ s"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.& l, T' T5 b+ d# c
# A+ L J9 W8 ]! h7 Y7 X C0 h2 tIndustry 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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; {1 H f- }7 R* FBut 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.
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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."- t9 @- C9 U3 y/ `6 x1 |( y
3 P: X0 L+ q+ V+ L, {( x1 [/ WAnother 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.# d! V7 {4 T( K8 n4 O
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"(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.
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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.
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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.") U2 D1 h! j2 Z1 ?
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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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"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.% m9 Z- h+ M* j5 M- n. E
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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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