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Gas prices are rising while crude prices are falling. What gives?$ W, R* v( v4 Z1 C5 V
Published: Friday, January 16, 2009 | 5:11 PM ET* i1 L. A: W; e; _/ }
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine4 ^! j$ S9 J$ F
( ^# T& t$ |& \& y G0 p2 z1 m3 bCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.$ k0 N$ k6 c% f1 y1 N* @/ H2 g
+ q- v" x) v- t" K0 D+ wThe 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.
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6 ?8 Y/ |, L. `. F4 y k8 RCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.
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. C. q3 i A$ L"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.' E7 h$ F1 V0 P+ _* V' ~
( y$ r: y) @+ T8 \. N: qBut 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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"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.7 T8 |( D; z. E7 y
" c. b2 U# s+ \* w4 C, A"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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The price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.
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- ^$ W* E/ v; o5 A; ~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.. o, P! S( [ a& ?6 X
! |0 W# ?3 x8 C# t6 ?7 |4 z"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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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.1 r* W5 J+ I: y: \
: f% z* V( ]1 q1 O- h# cBut those oil companies - private-sector players in a free-market system - also want to turn a profit.0 F1 M4 _3 H1 C% H
+ h# q# q6 n+ u" T0 K4 Y& h"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.( w v& d% e! Q9 y+ U9 m& ~7 y& `
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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."% m1 b! t. K( T k# g7 Z+ j& d
0 I7 }. x9 m. y9 M# [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 $42.57 on Friday.# Y g) b4 U) E4 j# t
6 u w+ S8 X9 a r"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.
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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said. p- a/ T* F& t( j
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"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises.") V6 @- ~8 q# t0 c$ S5 E, P
' ^, a7 X$ w8 }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.7 x. q( s8 N+ B2 ?: T4 x
7 I/ J/ J. I# g9 Q; t4 R"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.$ G0 d8 W" _2 N& _
, \0 ~9 W* ~" Q! }5 p: {: H"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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