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Gas prices are rising while crude prices are falling. What gives?3 @# J( b# i7 k( N6 ~7 z
Published: Friday, January 16, 2009 | 5:11 PM ET+ j. r) W. C% _# y1 z3 H1 n& t5 e
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine3 h8 h4 O, g9 u8 x7 q
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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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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.3 M% h% U6 G& x! x) G; U) s
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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.6 \ T) T1 y- K0 C
: `6 u( L- Y, u: t' r8 K2 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.
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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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O. C( Y3 I! Q- I0 R: l4 }2 B"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.5 L. F5 q, b- E, V+ d. R3 q [
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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."9 B1 ?0 R I, m; Q
6 p. o; F" S& D5 I+ LIn Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.4 W5 e2 o* v8 G& _; p# S' l
& \0 s4 x3 Y9 oVancouver, 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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* `! r* r- F6 o/ j3 x& dThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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/ I( V+ _) F, s6 U( A! Y* n"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary.0 x8 ~3 q) y2 u" h
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Industry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.% K: i% f9 i2 |7 ^& i
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.
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# p0 C3 y; p4 A6 s' b"Without question those gasoline prices are going to be the highest they think they can get away with without their competitor undercutting them," said Hirsch./ ?1 I. g5 i: x6 ~4 v- S% Z6 l1 T: Y
- @% h$ w" Q1 t4 X+ T% ]# _2 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."
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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 $42.57 on Friday.
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' x/ X. n$ p( @+ L* g+ i"(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.
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4 J1 {1 \5 E( q3 H"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said." y( R4 d! x1 S2 h. ~5 C. L
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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."
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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.' ]/ y/ }8 |7 |! `
7 X- S" o6 o* X0 b5 i* v) ^: E' n"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./ e+ [7 c5 m" J. Y( U& c0 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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