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Gas prices are rising while crude prices are falling. What gives?0 ]& c6 D3 X, Q# b
Published: Friday, January 16, 2009 | 5:11 PM ET
8 G. N0 R. v6 r3 d* n' {3 kCanadian Press NewsItem/NewsComponent/NewsLines/ByLine( P, E1 X1 ?1 g
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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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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.9 z4 p7 k9 v x) |
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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.* g' K1 E$ t8 V1 U# x; Y
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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.: [/ D* v: I3 D0 {4 b
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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.1 c& ]) b/ B1 T/ w5 |
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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."
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5 Z' s, d8 u. E& |2 XIn 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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8 }; B2 h, L' v/ ^+ ?Vancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago. W9 u! A( ^- _7 ^
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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.4 T4 p) q- N4 q" M, }' T
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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$50 a barrel a week ago.
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s5 Q2 M- d# @- q9 ]"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.$ o) ` T' g I3 R M
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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., Y0 |7 M3 P& ^
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But those oil companies - private-sector players in a free-market system - also want to turn a profit. N) e2 `, e& C% M0 Z
# j. s% b$ _4 S1 W" a"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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! J; ?0 u7 u7 H"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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% M! y5 W7 x+ E! [1 b! m; rAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.+ I& `, T$ @- k& X! W: @ ^1 W
2 Z/ m& |8 L, f9 A( m3 P$ B+ R"(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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8 d4 ]0 y3 r: e! dHirsch 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) B) B; n* w& T; c- q8 p"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.. V0 \! L# t" W: T3 r
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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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4 G& q( L4 p4 |8 l9 X) UBut 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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9 ^. h! a& P K$ ]"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.( U# b2 z( N/ \. h) `
/ d% l' G' V0 Q1 W/ X* Q9 _+ [% }4 ]"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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