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Gas prices are rising while crude prices are falling. What gives?$ |: [" ? x L& R
Published: Friday, January 16, 2009 | 5:11 PM ET, Q3 j) |7 D. [0 G, _
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine; A7 V. @& A) D: f
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CALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.
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" r; G( ?" @7 z; g/ YThe 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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7 s' ]8 ~3 v2 j" F" LCalgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.. Y) k r$ c0 u9 \" J6 a
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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.+ i( v. X% c# x, W) A& C) f( f
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But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.
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"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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1 R7 F8 ^0 T; s8 N' I"Because of the fact that the prices are so reasonable, I've actually taken the liberty to drive more. I've really enjoyed doing more driving."
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In Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.
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+ c8 y- Q$ p: N% {Vancouver, 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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- _" a. A I' L6 T7 N" w" J( gThe 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$50 a barrel a week ago.7 l# d# j `/ K$ H/ k2 L- j
( v0 C- M9 ~) b"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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5 M' W* \; l# M. H. O: hIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.& _* Q! k& C. N, \3 U/ r9 A
~2 `+ g. ]. l, v. |5 N2 V. j. BBut those oil companies - private-sector players in a free-market system - also want to turn a profit.
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' G) ?6 ~& y; z9 a"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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7 K2 |) t+ p- j `"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."
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* d; ]" Q7 c) @- m- u' tAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.
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"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.: c3 U+ l1 Z/ _4 J8 ~9 Z
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.$ m" Y% E H! f: U
6 z* g9 i) O; Y* j$ V$ P- b"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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0 b; }) o( t% ~# ?# q+ L"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."1 H7 _7 N3 w! x
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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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"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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: L1 A: }# V! d. u6 u/ V$ _2 H: _"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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