NLIS 1
August 28, 2003
(Government Services and Lands)

The following is being distributed at the request of the Petroleum Products Pricing Commission:

Commission interrupts regular pricing schedule for gasoline

Gasoline prices on the world market have recently reached levels that haven�t been seen since before the Middle East war erupted this past March.

Because of the serious nature of this sustained spike in prices and its potential impact on fuel supplies in the province, the Petroleum Products Pricing Commission (PPPC) will implement an early adjustment in prices through its interruption formula (a mechanism used when prices spike up or down an average of 3.5 cents per litre [cpl] over five consecutive business days).

For the first time since the commission introduced its interruption formula March 14, it will be used to increase gasoline prices. This is in contrast to two previous occasions in March and April when using the formula meant moving fuel prices downward prior to the normal pricing adjustments made on the 15th of each month.

Effective 12:01 a.m. Thursday, the price for all types of gasoline will increase by 5.8 cpl. No other regulated fuels meet the criteria for an interruption and there will be no changes at this time.

George Saunders, PPPC commissioner, said circumstances over the past two weeks have produced a highly volatile world market where, for example, the price per US gallon of gasoline on the New York Mercantile Exchange (NYMEX) has risen from an average of 88-90 cents to $1.12 as recently as late last week.

He explained that several events driving prices include:

• shortages of gasoline supplies (only slightly above a 28-year low reached in February);
• an increased demand for gasoline leading up to the Labour Day weekend;
• the August 14 blackout in Ontario and New York which shut down several refineries in Canada and the US and slowed restoration of production to pre-blackout levels;
• the continued delay in the complete return of Iraqi oil to the market; and,
• unrest in Nigeria and Venezuela (two major oil producers) which has resulted in export disruptions and brought oil reserves to 7.9 per cent lower than last year.

Because of these incidents, the prices for gasoline have increased dramatically and an early adjustment in fuel prices is warranted.

Mr. Saunders said increasing gasoline prices now isn�t an easy decision, especially when Newfoundland and Labrador has just enjoyed a summer of stable prices at the pumps.

"I believe that if this province wasn�t in a regulated market, the price increases would have been more frequent and much higher than what we are implementing today," said the commissioner. "There are so many things happening now affecting prices worldwide that it�s having an impact here. We designed the interruption formula to handle situations like this, and we want to stress that we will lower prices as quickly as possible should they recede enough to trigger our interruption formula in the other direction."

No one can foresee where the market is headed, but the commissioner noted that daily monitoring of fuel prices will continue, and the public will be notified if any further intervention is made before September 15.

For more information about the PPPC interruption formula, visit the commission�s Web site at www.pppc.nf.ca, click on PPPC News Releases and go to the March 14, 2003 link.

Automotive Fuels - Maximum Retail Pump Prices - Effective August 28, 2003

Media contact: Michelle Hicks, Communications. Tel: 1-866-489-8800 or (709) 489-8837. Cell: (709) 486-4789

2003 08 28                                        8:50 a.m.