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Gas prices are rising while crude prices are falling. What gives?$ L, Z+ c4 Z5 j. b- @: d" ^) E
Published: Friday, January 16, 2009 | 5:11 PM ET
) f8 h5 o; q- b3 y7 ACanadian Press NewsItem/NewsComponent/NewsLines/ByLine* W1 u% f5 P$ x5 n& q1 O0 n
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CALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.) D5 Q* Q8 I' y9 j$ P D. {1 {
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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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' O- b+ a* A' H! U: W5 GCalgarians 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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u2 I7 n% M! x1 bBut Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.
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! S: H: K3 {' I* U1 c; v"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."! ]8 N: J( a# g2 |- J
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In Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.! ~! a3 J$ \1 e& p6 G3 I: Z8 p* I
! X, l5 k; B6 fVancouver, 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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The February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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2 L5 t1 }9 O3 m: h0 m"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.
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9 N8 G w! s C1 WIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.
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# U" n( d: R# l% m- X1 OBut those oil companies - private-sector players in a free-market system - also want to turn a profit.
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"Without question those gasoline prices are going to be the highest they think they can get away with without their competitor undercutting them," said Hirsch.
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"They're out to maximize their profits for their shareholders. I don't think there's anything evil going on in them trying to get the highest price. Every retailer in the country does this." a) \' X2 X8 d! A
( m! r! [, p p Y! L w. ]! b$ y+ X$ t/ PAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.
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9 k8 ^+ ?8 v' m0 [: V4 \# S# m"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.. b/ Q, Y9 _, e. K3 |* Y& C
9 g, J5 k3 y) ^6 l"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.2 C" }3 w; A( n' ~/ t
( ]( ^4 t$ Q% m"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.8 ~, q- v5 Z6 X! N( Z
; Q: F! i8 N4 {8 |2 u"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.! k4 L- {7 v8 z( a3 n+ S
& j0 {) v M! m. Q- X7 Q"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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