NLIS 1
July 25, 2005
(Government Services)
The following is being distributed at
the request of the Pricing Petroleum Office:
Petroleum Pricing
Office - Interruption formula used to reduce diesel prices
Effective 12:01 a.m., Monday, July
25, 2005, the Public Utilities Board�s Petroleum Pricing Office (PPO)
reduced the maximum prices of diesel fuel by 3.1 cents per litre (cpl)
because the interruption formula criteria have been met for this
product.
David Toms, PPO director (acting), said market pricing backed away
from record highs on the New York Mercantile Exchange (NYMEX) for
distillate products since prior to when prices were let set for July
15 in Newfoundland and Labrador, and it was only recently that the
numbers moved sufficiently to require the use of the interruption
formula for diesel.
MARKET ANALYSIS
Market fundamentals have played a role in decreasing refined
products prices, such as the fact that U.S. (the world�s largest
consumer) inventories of crude oil, gasoline and distillates are at
or above their five-year seasonal averages. While demand for diesel
continues to be strong, increased refinery production of distillate
fuel has helped inventories to grow in order to meet expected high
demand later this year.
The commodities market also reacted favourably to news that the
International Energy Agency (IEA), the Paris-based advisor on energy
to 26 industrialized nations, cut its forecast for global demand
growth this year because of slower-than-anticipated growth in the
U.S. and China.
As well, OPEC (the Organization for Petroleum Exporting Countries)
is reportedly continuing to pump at near capacity to assist in
rebuilding inventories to meet demand later this year. However, as
refineries continue to operate at near-maximum levels, many analysts
believe there is still a lack of spare production capacity to meet
the anticipated increase in demand. This underlying uncertainty
about the future of the market makes any event, which would
ordinarily have a minimal impact on refined product prices, become
significant.
BACKGROUNDER
PPO benchmarks are established based on the average prices of
refined products in the
period since the last time maximum prices were established. The PPO
regularly sets maximum fuel prices on the 15th of each month.
For the interruption formula to be used on gasoline and distillate
fuels, the PPO requires the average of market prices to be 3.5 cpl
greater or less than the current PPO benchmark
prices (except propane, which requires +/- 5.0 cpl) over five market
business days. The formula is not used for five market days after
new prices are set under regulation, or if it interferes with the
impending price change made each month.
Illustrated in the following graphs is the market-price performance
of diesel fuel, as well as other products regulated by the PPO for
recent pricing periods up to July 21, 2005:
Automotive Fuels � Maximum Retail Pump
Prices � Effective July 25, 2005
Media contact: Michelle Hicks, Communications. Tel: (709) 489-8837
2005 07 25
10:10 a.m. |