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Gas prices are rising while crude prices are falling. What gives?& H! z& Z- }0 B" g
Published: Friday, January 16, 2009 | 5:11 PM ET$ X1 R3 W- W# ~, H5 G) h9 |5 `+ N
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine8 o- X0 ^+ g1 F& Y
+ y2 j7 c) _& o, M; B. FCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.6 `0 h; f. y$ R- W, O8 S0 h7 M% q
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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.6 ] C0 p9 k/ d( m& o. Z
$ j) r$ h0 s7 m7 N" MCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.' Y: r* O# C* \6 j" P0 b
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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.' Q8 m y5 Z3 G: ?: ]" U
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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." d) ]: V, y0 `6 r% X: |+ j
! ?6 _; N9 p% T. j& R: V# Q0 F"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.- {+ R& V3 L% D( j
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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."% |! h7 G1 S' ^8 k* ]; S1 F/ \
5 Z# @3 q: _ i: UIn 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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5 g, {) f! s% bVancouver, 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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+ l4 H6 S: z7 z& C; @The price of crude oil, the main ingredient in gasoline, has been dropping steeply since it's peak of $147 reached in July.# b6 |% ~+ {3 R K! [0 A
/ k' {" t9 F5 b9 O& ^1 b% CThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.
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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.
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" `. p4 q9 ^+ s. x. ~# V& TBut those oil companies - private-sector players in a free-market system - also want to turn a profit.0 P$ ^0 X O& z- i/ Y3 ]. `3 y
- A- {% `5 R" s: o* U" 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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# E! E L8 ?4 M* }4 F: S M( w' v8 ]' v"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."/ g- o4 {% W0 q+ M
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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 $42.57 on Friday.9 }! Z* ~4 s7 e. c' B
/ ?: X" w$ V0 j# ~5 `"(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.2 _- x0 V0 A" {, ^4 N
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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.) F+ k: M9 _0 ^% G- h
: Y2 X2 o/ w2 Z$ J3 a- k"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.: x- N3 [9 {. \ ~" W4 W) N
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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."9 x+ w, f: L9 ^# x/ t; w* w
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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.' [6 O' |, Y# c( m& {* u+ f! v
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"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.
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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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