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Gas prices are rising while crude prices are falling. What gives? x# \6 ?$ ]. w( a7 j
Published: Friday, January 16, 2009 | 5:11 PM ET. P! U, C; w& t( y2 \' [
Canadian Press NewsItem/NewsComponent/NewsLines/ByLine6 G( h% b" R# w0 {8 M* r
: G* i9 w1 f( f5 _3 M& TCALGARY - With crude oil prices falling, motorists may wonder why gasoline prices are heading in the other direction.$ B- D# P" Q z4 m8 W. h
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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.* x/ G$ |0 M1 B: Y1 \( G+ k) [
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Calgarians were paying on average 81.5 cents per litre - about a four-cent jump in just one day.
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% t9 s! Y, S& J, _! L6 t"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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8 N: h1 r5 o! ~7 e/ G* y9 B2 W& `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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% h6 n+ B. B {2 U8 t"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.0 ?4 u( U6 d5 Y- B0 w0 }" Z
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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."5 |) T# G& X8 |# }# V+ V/ _
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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 74.2.8 e% u; g! \6 X
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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.# p! Z5 g/ }# B, ?" G
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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.% q& ?6 f4 c5 \: z; Q4 t; z k
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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$50 a barrel a week ago.
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; J, i9 i1 l4 U8 J7 U$ x3 j2 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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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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But those oil companies - private-sector players in a free-market system - also want to turn a profit.7 P8 e/ B7 ~& ^+ D- f
- K/ t4 l/ j- A0 q+ S6 s9 @"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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; a; F( F9 {( k0 q"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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Y" `- B5 E! a3 e" OAnother explanation could be that the February contract for crude oil expires on Tuesday, and the contract for March is already significantly higher, settling at $42.57 on Friday.
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% ^5 Z. c' Z- a- I"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said.
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$ d5 F& C8 [5 [, P# _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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7 E+ d6 B# _9 X! E# p"I'm not seeing a lot of strengthening in crude oil prices over the next six months," he said.
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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."3 _& @. l+ o$ {! H+ C5 R
: ~; K, p( T3 `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.! k! ^ ^- A2 e
t$ W5 R/ ]" |"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.6 b& J5 Z( Z0 [' p' ^( O& d
+ I; }( u' m* G) ]0 ?, Y y# p"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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