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Gas prices are rising while crude prices are falling. What gives?# f/ H/ u* X" T) M2 D" v
Published: Friday, January 16, 2009 | 5:11 PM ET
5 d. o$ g7 H9 j3 y5 Q) qCanadian Press NewsItem/NewsComponent/NewsLines/ByLine+ k, M( s) _+ p7 H: h( C( m( ]" b) l
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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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. X0 Y! a+ V8 h/ Q: P+ c0 B( \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.0 h M3 H2 a8 ]- p
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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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"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 $1.40-level gas many Canadian cities faced during the summer.
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5 r- M7 K2 `* _! |"I definitely changed my habits in the summer. I was going to go on two road trips, which I did not go on by virtue of the fact that the prices were so high," Lawnikanis said.
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2 O( c1 `7 g$ u0 w; `+ L"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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/ d2 Z: E. i9 yIn Toronto Friday, pump prices were 80.9 cents per litre. On Thursday they were 79.4 and a week ago they were 74.2.: A, K" v4 |8 b: j; \
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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 $147 reached in July.
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8 T# B/ ^1 \5 y, |$ n) AThe February contract for crude oil settled at US$36.51 on the New York Mercantile Exchange, down from more than US$50 a barrel a week ago.
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"Crude oil is an important input into the distillation of gasoline. But there's a lot of other factors as well," said Todd Hirsch, senior economist with ATB Financial in Calgary." T9 j& j; }$ A! D" K# R7 @6 w: i
{0 U9 Y: @7 h" M* b' M9 SIndustry players would say they have to account for transportation, marketing and other expenses - not to mention taxes, which vary from province to province.5 @0 }9 V0 ^- b# e5 m
6 k/ A7 V6 m: {! v# `1 E& LBut 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.' F, k& ^! G3 ~9 l, D1 z
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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."6 v2 X D, ^; S4 W
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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 $42.57 on Friday.
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6 j% B, N& H L. m; R"(The oil companies) might have realized that while prices were low in the last couple of weeks, they knew that there was going to be a correction," Hirsch said., C" u4 A0 d" d2 Q
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Hirsch expects pump prices to bounce between 60 and 90 cents per litre over the next few months, but not retesting the heights of last summer.6 H- T% F; }8 k5 k1 M% s9 Z$ {
+ j2 E! @- n" ^3 _# j( e' n; {, X"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."2 f& d7 D" H* w: C3 w7 [5 R
& w. q; d N4 ]% XBut 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.. G- n& i4 h& x% C3 _# T
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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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+ i+ U) D* J% ~9 b* P; |0 w' E"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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