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Gas prices are rising while crude prices are falling. What gives?
! W4 ^0 u2 d" c( Y: H7 I, F0 PPublished: Friday, January 16, 2009 | 5:11 PM ET- F9 [ j5 g. g j% k
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine2 x. b- }* a/ a' k4 B* T
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CALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction. g G2 {3 Q5 X
; K) m0 _. N0 F* H& tThe 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.- W& Q+ N* {: W0 Y
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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.2 z/ T6 B. c9 v u/ L
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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.
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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.
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) p9 e, x+ L2 ~3 J+ P"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.& A3 {7 j6 O. U; l c
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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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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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8 X9 c T! R- nThe price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.
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5 ` w# r* V3 c4 ~$ `The February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.1 Z4 D' q$ l' @ f
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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.
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% N8 K$ {) j1 W2 M& ZIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.7 c5 O0 Q( Q1 k# X6 l0 {
9 [, b" V* U: C1 w* I' RBut those oil companies - private-sector players in a free-market system - also want to turn a profit.2 A" I8 v" g: x
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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."
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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 $42.57 on Friday.' b& J; w; Z" {# o& S
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.1 t! r! T7 @! U
7 t9 n, \4 G8 ^! {"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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& N2 ?1 H- M. L7 V) d"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."
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But Gasbuddy.com co-founder Jason Toews said he sees gas prices going higher than their current levels because of a slowdown in Alberta's oilsands and expected production cuts by the Organization of Petroleum Exploring Countries.
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5 {9 a) n* W$ v. @0 {% L7 o a"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.( v9 d2 [9 t+ w4 V% O
0 S: X0 z* ~7 E2 n" h& s- q+ R"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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