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Gas prices are rising while crude prices are falling. What gives? E/ ~& ?- I4 E k) T% \
Published: Friday, January 16, 2009 | 5:11 PM ET; ?9 `! E" n% U1 l+ r
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine" G1 s1 t& _1 f
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CALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.. Y5 @: ?- v( I, H* F& m7 l
$ U/ |' Q, l: RThe 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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"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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5 j4 e& y0 C/ T" e* F# uBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.
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"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."# V7 X4 J1 z( K+ c; E
6 L4 M- t; }; d, oIn Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.5 T) g& ]" A) m$ x# M- P
* \7 ~4 ~4 B2 p+ \Vancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.) ^; C3 L4 y* p& E3 r
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The price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.
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4 c3 O9 t$ V5 U& l" b0 D7 cThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.$ c8 u; M! y M" o0 u
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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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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.
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8 ^6 @9 c. N: a$ h' p"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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, I3 l6 m1 j; M8 t2 y3 `/ i0 r; S/ u3 b"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."/ ~* \: _! y% F6 U! 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 $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.% @, a: N5 i; ?; Z
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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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# U# `2 q8 [6 D. s1 Y"In the next six months I would expect to see gasoline prices more or less in the range they're in now, maybe firming up a little bit towards the spring and summer driving season as demand rises."( h6 }! \: u( Q$ b9 n
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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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; c1 ^& Q+ r8 ^4 J2 l8 `, u1 }; ~+ M"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. ? d7 p- W ~1 X
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"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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