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Gas prices are rising while crude prices are falling. What gives?) u6 m' P! ]4 p: [
Published: Friday, January 16, 2009 | 5:11 PM ET& J2 O4 t4 h8 }! v5 \
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine2 z- t$ c; k; v4 s, g
, ?. t/ j& M- G) e# UCALGARY - 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./ z# \6 \; p8 ~, H9 d
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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day., J% }, T; X9 V- b% F& d3 t' {
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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.. h, `2 g2 v, m7 B4 d( L
. `! x3 M- D+ \& M& s1 `But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.
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! S0 O& ]( j+ V7 n"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.8 l# a2 |$ I4 ^$ X8 x7 F5 d
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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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& D, L% q1 ~3 E/ Y3 C( ~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.! n" e: T3 x% T# h0 Q: F1 P
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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.# W+ C2 ]$ M0 a) g. t4 H
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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.* i2 Z" ?% X/ D3 H: v
8 |. v6 g& P8 MThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.
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) v0 B3 b& T& r3 ]" FIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.4 @9 G: a: H1 i9 g- `
0 s' f+ @& Q" C6 p! w& [0 KBut those oil companies - private-sector players in a free-market system - also want to turn a profit./ l' q( n4 m' ~; W( S+ h( m5 {
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"Without question those gasoline prices are going to be the highest they think they can get away with without their competitor undercutting them," said Hirsch." s& n: L( F: A6 p+ v( k3 ]
6 x _3 w+ g$ H$ f/ S9 y"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 $42.57 on Friday.9 o4 J. L( X6 i: B. J( ]
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.* L% N5 G: z( h( J2 r7 U( r
- r# ?+ ^; }( w, w0 cHirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.
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: [3 Z; P5 g* ?"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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6 W) t: k$ Z. b4 {2 ?' o"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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$ J6 |: G; R& B) q- [2 R4 l9 a0 DBut 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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# w" ~' h! W7 e/ `; \"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.9 \. C7 W0 g' G$ i8 U$ c& C1 Y7 _
- ?( i) [4 R4 Q3 K4 E& `"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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