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Gas prices are rising while crude prices are falling. What gives?
|; v0 r9 B% h( WPublished: Friday, January 16, 2009 | 5:11 PM ET
5 N9 e! w/ C' u7 Y% {6 JCanadian Press NewsItem/NewsComponent/NewsLines/ByLine2 o* ?; C6 q( E
5 }1 P' k& y" J3 {- B1 d6 g4 _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.9 Z/ R5 E1 ~3 F6 \- U& Z
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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day. A" n% ] v0 Z, W4 i5 n2 p
- B; c8 k+ h8 g2 `" _- F"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.% b2 X! W7 M) U! S! E+ W* n. ?' y
; `. ]( _' [9 O X/ D, }But Friday's price is still a welcome respite from the $1.40-level gas many Canadian cities faced during the summer.
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"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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, t$ V/ w; y- _ r"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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3 g, `- u: i% mIn 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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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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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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* S- y3 G* z3 |3 r& ^5 t9 @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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9 Q% v' R1 A& f& e+ W"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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" A- ?" E- g) e: v( b6 tIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province./ }( o3 Y& o+ ?8 N, c5 l# v
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But those oil companies - private-sector players in a free-market system - also want to turn a profit.3 i9 `: v! X5 ?3 c( u
j9 \) \% f! ?% v# ~* e) c"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."
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) D$ G$ s/ N( _+ C; U( K8 [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 $42.57 on Friday.+ V$ \1 h) N7 V! f" z% D) a, ~
- r% q# L2 k9 F i( Y0 p( R"(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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" L+ F& V4 a* z; _5 bHirsch 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.$ i! m( S+ R8 T2 v- v
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"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.' \ U# @9 |8 W+ S. s1 U
& T! w0 c- Q$ j7 `; `"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."2 S4 j' C% M# p1 g4 e2 K
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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.) c. U# x5 o2 H; }+ a: N; p% U
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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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