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Gas prices are rising while crude prices are falling. What gives?* H5 n) u! Q5 e+ g5 C
Published: Friday, January 16, 2009 | 5:11 PM ET, ?7 C l; I7 ]$ A
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine) i& A2 v* v2 s* f2 k
( W- J1 D3 [, r5 m: X4 @CALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.
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4 g& U! p: p7 eThe 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.7 ^/ g: J/ D/ F+ g; L5 W5 A! @
! C$ E, q. D% F7 h! O# hCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.8 a# r' o0 M0 n" E5 c7 }
2 c. N1 w, b# P"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.0 w, z1 i1 e4 U: E; G' p, g
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But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.
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) x# Y7 l. t1 z1 U2 Y/ p"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.% g. u" A3 a' Z4 R
. R# u: Z ~. V% R9 U, |5 R( n"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."! f& S" f4 M2 ^+ L
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In Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.: b' v) }3 q' \" ^0 D" P' P4 o' }
; D% u# T/ A6 z8 r+ c+ uVancouver, which has higher gas taxes than other cities, has prices of 94.7 per litre, up from 87.5 a week ago.1 C- j' H+ G0 E$ f
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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.7 k5 x O& V. H+ f/ H, F
5 }/ G6 ?6 h4 U4 }5 DThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.4 A: k0 V% {- C) m4 H# b
1 J) Z& Z; F4 ]. B4 S"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.
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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.
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) x$ d3 C; r" T1 o/ x% UBut those oil companies - private-sector players in a free-market system - also want to turn a profit.
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"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.# A4 I# L5 p/ w/ B3 y2 B
. d/ @* n( G3 H; Z7 a! M: @"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."% O4 j# D% j8 k$ R5 e
* [) M- \3 D: x5 z' SAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.7 t3 r. r' s! X+ q: Q, h
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.4 T4 h+ k) ~" ^) f$ K, ~
4 N- W. R* H* G"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.. j' ~2 }9 K' P8 V
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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."+ }) T/ X5 _$ N# N1 u
0 O! b# V Z4 d4 HBut 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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+ W* L/ K: [4 k% u, u" X6 {"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.8 w0 F/ K6 a _% Y
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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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