March 25, 2003
(Government Services and Lands)
The following is being distributed at the request of the Petroleum Products Pricing Commission:
Market conditions warrant early fuel adjustment
The Petroleum Products Pricing Commission (PPPC) will use its interruption formula for the first time to address falling world oil prices over the last five business days.
As outlined in its review report released March 14, 2003, the PPPC introduced an interruption formula that was designed to address major sudden and sustained increases or decreases in fuel prices as they occur.
For gasoline and distillate fuels (home heating and diesel), a pricing adjustment will be made if the benchmark price increases or decreases an average of 3.5 cents per litre (cpl), excluding taxes, over five business days. In this case, the first day used for the formula was Monday, March 17 and the last day was Friday, March 21. Any adjustment is calculated using the average of all prices since the last regulation period.
The war in the Middle East resulted in a steady downturn of world oil prices by approximately 25 per cent just this past week, as OPEC replaced oil lost from war-torn Iraq and U.S. and British forces captured key Iraqi oil fields and ports. This activity has calmed previous expectations that a war would create higher prices and increase a threat of fuel shortages.
The commission has been closely watching this situation to determine if it would need to interrupt the normal pricing model in order to reflect the changing market.
George Saunders, PPPC commissioner, said his researchers have advised him that an interruption is warranted at this time for all fuels regulated by the commission.
Effective 12:01 a.m. Tuesday, March 25, the maximum price for regular unleaded gasoline will decline by 3.9 cpl. The distillate fuels will also see decreases – No. 2 blend furnace oil by 9.58 cpl; stove oil by 9.14 cpl and diesel by 10.9 cpl. Residential propane prices will go down by 5.8 cpl.
Mr. Saunders said the world is in an extremely volatile situation, and anything can happen on a daily or hourly basis.
"We are living in special times, and the world landscape is changing as the war intensifies," said the commissioner. "Newfoundland and Labrador will continue to feel the effects of this war as time goes on. But I can assure the public that this commission is committed to ensuring that fuel prices in this province are stabilized and that all stakeholders are treated fairly when it comes to pricing in the petroleum industry."
Mr. Saunders cautions the public that just as prices have fallen quickly for petroleum products over the past few days, the reverse can hold true as well.
"We have to be prepared for situations where prices could increase suddenly and remain that way for some time," said the commissioner. "If that were to occur and the criteria for our interruption formula are met, another pricing adjustment may need to be made. But we can only deal with real figures based on previous days of market performance, and the commission will respond accordingly."
Copies of the Petroleum Products Pricing Commission’s review report can be
viewed on the provincial government Web site at: www.gov.nl.ca/releases
under release archive (March 14, 2003). As well, the report can be accessed
at: www.pppc.nf.ca under PPPC
Media contact: Michelle Hicks, communications officer. Tel: 1-866-489-8800 or cell: (709) 486-4789.
2003 03 25 9:20 a.m.