Government Services
November 8, 2007The following is being
distributed at the request of the Public Utilities Board�s Petroleum
Pricing Office (PPO):
Volatile Market Reflected in Local
Maximum Fuel Prices
Annual jet blend calculations, Labrador
price freeze implemented
Effective 12:01 a.m. Thursday, November 8, 2007, the
Public Utilities Board, through its Petroleum Pricing Office, will set
maximum fuel prices as per its scheduled biweekly adjustment. The annual
implementation of the jet blend into furnace oil calculations and the
price freeze for certain Labrador pricing zones will also occur at this
time.
As a result of the average commodity market movement,
the following represents the changes for maximum fuel prices:
All types of gasoline will increase 4.3/4.4 cents
per litre (cpl), depending on the HST rounding impact in a particular
pricing zone;
Ultra low sulphur automotive diesel will rise
3.5/3.6 cpl;
Furnace oil will see the seasonal implementation of
the jet blend at this time, which means the maximum price for this
fuel will increase 6.04 cpl, and stove oil will increase by 3.55 cpl;
and,
Residential propane used for home heating purposes
will increase 1.7 cpl.
Following a two-week period of general stability for
fuel prices in NL compared with increases experienced elsewhere, prices
in the province during this adjustment will now escalate to reflect the
significant upward pressure being exerted on the prices of all petroleum
products in the global marketplace. With crude oil at record levels
pushing $100 US a barrel the effect on commodity prices for refined
petroleum products has been quite pronounced. In addition, rather than
predicted gains, US stockpiles of refined fuels have seen significant
draw downs linked primarily to a much stronger US economy than expected
in recent weeks and an earlier beginning to the higher demand
heating season in some regions. Aside from these economic
factors, weather disruptions and geo-political events continue to
contribute to market volatility, including tensions along the
Iraq-Turkey border, the latest round of sanctions against Iran over its
nuclear program and uncertainty surrounding future production decisions
by OPEC.
The strength of the Canadian dollar continues to
shield NL consumers from the full brunt of these price movements. As the
board converts US market data into its Canadian equivalent each and
every day, all the recent record highs reached by the loonie play a
significant factor in the calculation of maximum prices. The impact of
the higher Canadian dollar on prices paid by consumers for gasoline is
evident when current gasoline prices are compared with those of a year
ago. Without factoring in the changed value of the Canadian dollar
consumers in this province would have seen an increased price
differential of 29.6 cpl versus one year ago. When adjusted for the
current value of the Canadian dollar this price differential is reduced
to just over 16.1 cpl, resulting in a direct benefit of 13.5 cpl arising
from the year over year gain in value of the Canadian dollar.
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As of November 8, 2007, the maximum price for furnace oil (also known as
No. 2) will see the seasonal incorporation of what is known as the jet
blend. This practice has been ongoing in Newfoundland and Labrador for
the past several heating seasons to accommodate the costs associated
with mixing 75 per cent jet fuel with 25 per cent furnace oil to improve
this fuel�s performance in colder climates over winter.
Labrador price freeze:
The annual fuel-price freeze occurs in several Labrador zones,
including: Zone 11 (Labrador South � Lodge Bay / Cartwright), Zone 11a
(Coastal Labrador South � Tanker Supplied), Zone 11b (Coastal Labrador
South � Drum Delivery) and Zone 14 (Coastal Labrador North).
Policy on this matter has previously been developed in
consultation with stakeholders from these regions, and is largely based
on the difficulties encountered in supplying fuels to Labrador. The
winter freeze-up affects the shipping season, and there are problems
with road access during the winter months. The price freeze will
continue until deliveries to the region resume in the spring of the
year; however, in the case of Zone 11 (Labrador South � Lodge Bay /
Cartwright), where road access may be available prior to the beginning
of the shipping season, the board will consult with local stakeholders
to determine the appropriate end date for the price freeze, as it has in
the past.
