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Gas prices are rising while crude prices are falling. What gives?! R6 H3 u2 o) }! r \2 ?# j3 z
Published: Friday, January 16, 2009 | 5:11 PM ET
/ W" p! w, e( n; T1 B, ^Canadian Press NewsItem/NewsComponent/NewsLines/ByLine
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CALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.7 v7 k4 B8 {- P* P3 R
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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.
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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.
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# P+ m6 v8 t7 v ?$ 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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$ E9 T. o, c# B3 H+ ]# G- Z' GBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.6 v5 d* g) i0 Y' T% Q
' {- v7 y6 [8 |* r7 i9 A9 }% _"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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7 M+ `' C7 T3 E- R: {, J% {"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."
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7 y+ E& \& s$ ^2 F9 {2 sIn Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.6 ~1 y& G- \* e( ~0 c
% O* A, s2 j& c% YVancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago./ W- R* n! u0 g/ g7 M9 |
, W2 R9 _2 l9 |/ n# pThe price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.+ N* x5 S, D; }
$ p- u% K! f6 `$ GThe 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.4 w7 _, t' y# m" F: {
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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.; b2 {& P6 X7 Z9 Z
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.( ~8 ~1 B; h6 Z8 U: s8 A4 i% F7 h8 G
, L z# p4 n: D a9 T"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."4 }6 Q' I; z" V" G% G4 Q. r
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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 $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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8 L3 i/ d# L, }3 A; a7 f! xHirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.# k' J! R# U# z1 u2 u1 |
( L; c i' {* g* g8 l' H; y! {% p; w"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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4 H0 j. |$ j4 J"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.. b5 H1 s8 N J6 ^
. F2 h- j: K& G/ 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.2 _, A- y5 ]4 g5 a P1 R
, f" V. E0 O. p' T$ a"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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