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NLIS 1 July 15, 2004 (Government Services) The following is being distributed at the request of the Petroleum Pricing Office: Petroleum Pricing Office makes fuel-price adjustments effective July 15 Heightened concerns about fuel supply disruptions on the world scene, coupled with a growing demand for gasoline in the U.S., have translated into a high rally in crude oil and refined petroleum product prices in the last week or two. The beginning of the period used by the Public Utilities Board�s Petroleum Pricing Office (PPO) to determine July 15 maximum prices for fuels regulated in Newfoundland and Labrador saw a short-lived ease in prices. Numerous events during the latter part of this period have created an uncertain environment when it comes to crude oil and the petroleum products made from it. Throughout the last 30 days, refined fuel prices on the New York Mercantile Exchange (NYMEX) have been affected by several factors, a major component being the rebounding price for crude oil. The commodity again broke the $40 U.S. per barrel price barrier last week. David Toms, PPO director (acting), said the world market has been surrounded with uncertainty for some time and it is unknown if, or when, this situation will improve. One thing is for certain, he added, the PPO is committed to continuing its work to effectively research and monitor the market�s pricing behaviour and its impacts, as well as ensure there is continued stability and fairness for regulated fuel prices in Newfoundland and Labrador. He explained that this is a challenge his office is prepared to meet despite the evident volatility for world fuel prices. "The prices we�re seeing today are reflective of the uncertainties that exist in the market and possible fuel-supply disruptions," said Mr. Toms. "We can�t say if these prices will last for the long term, but geopolitical events can occur that will impact inventories and make prices change quickly." Impact The PPO interrupted its usual price-setting schedule June 22 to decrease gasoline by 6.6/6.7 cents per litre (cpl) because of a decline in the market. However, that pricing environment has since turned around, noticeably within the last two weeks. While inventories and imports for gasoline in the U.S. (the world�s top oil consumer) have increased over the past while, they remain in the lower end of the average range for this time of year. Gasoline demand has also increased to its highest rate since October (Bloomberg News July 8), which has placed an upward pressure on prices. Effective 12:01 a.m. Thursday, July 15, the price for all types of gasoline will increase by 0.7 cpl. The distillate fuels will see slight downward adjustments � home heat (furnace/stove oil) by 0.46 cpl and diesel by 0.7 cpl. And the price for residential propane used for home heating purposes will also decline by 0.5 cpl. North American refineries are near maximum production capacity, which is helping to restock inventories. But the potential for more refinery shutdowns is being viewed as a possible threat to rebuilding distillate fuel supplies, and this is having an impact on prices. These products have been slow to rebuild, but Mr. Toms said inventories are in a safe range and may even be on the rise. "It is really too early to be concerned about the distillate fuels," he said, noting that last year there were early fears about home heating supplies, but they were eventually alleviated as the season neared and refiners were able to meet the demand. Market Behaviour The big story to explain recent increases in fuel prices has been the situation in Russia. OAO Yuko Oil Co., the country's top exporter that pumps one-fifth of the nation�s oil, has had its bank accounts frozen by the government over a multi-billion dollar tax dispute and it could potentially go bankrupt. This situation is creating a monumental concern about fuel supply, though the company has announced it will continue output and production and exports throughout July. Ongoing unrest in the Middle East, namely the terrorist attacks in Saudi Arabia and Iraq (which resumed full exports during the first week of July) continue to fuel fears that supply availability from this area may be disrupted as well. Also at play in driving fuel prices is a potential strike in Nigeria, which could interfere with oil exports. Disagreements between unions and Elf Petroleum Nigeria Ltd. have meant missed crude deliveries. In a separate matter, Exxon Mobil Corp.'s venture in Nigeria, the nation's second-largest oil producer, said discussions are continuing with a labour union that has threatened a protest over pay and benefits. In the meantime, OPEC (Organization of Petroleum Exporting Countries) has stated it will proceed with a planned production hike of 500,000 barrels a day in August in a further attempt to reduce world oil prices. The group will meet in Vienna July 21, and whether or not this move will have any impact on world market pricing remains to be seen. 1.Automotive Fuels - Maximum
Retail Pump Prices - Effective July 15, 2004 Media contact: Michelle Hicks, Communications, 1-866-489-8800 or (709) 489-8837 2004 07 15 10:50 a.m. |
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