January 6, 1999
(Mines and Energy)

Minister reacts to calls for gasoline price regulation

Mines and Energy Minister Roger Grimes has reacted to a new round of calls for gasoline price regulation. The issue of price regulation was reviewed in detail during the latter half of 1997, when, in response to consumer concerns government appointed Dennis Browne to investigate and report on gasoline prices in the province. In particular, Mr. Browne was directed to determine whether regulation of gasoline prices would be in the public interest. The study was completed following extensive consultation with consumer groups, town councils, the oil industry and various provincial and federal government departments.

"Government generally agreed with the consumer advocate's report and accepted its two main recommendations; that there be no price regulation and that government monitoring of gasoline prices be improved," said Mr. Grimes. "A monitoring and publication program has been established within the Department of Mines and Energy to keep the general public informed of gasoline prices and the issues related to gasoline pricing." While several provinces have investigated price regulation, Prince Edward Island remains the only province where regulation is implemented.

One argument against price regulation is that prices would normally be higher in a regulated market. Tracking of gasoline prices in this province confirms that this would be the case here.

Mr. Grimes said: "It's important to note that the Consumers Association of Canada is also on record as being opposed to price regulation."

Meanwhile, recent statistics clearly indicate that falling world crude oil prices are showing up at the pump:

• For the period December 1997 to December 1998, crude oil prices have fallen by about $7.00 US per barrel, from $18.32 US per barrel to $11.25 US per barrel. This would translate into a decline in gasoline prices of 5.5 cents per litre (Canadian).

• Wholesale prices have fallen over the same period by 7.2 cents per litre.

• Retail prices in St. John's have fallen by seven cents per litre, much better than the Canadian average decrease over the same period of 5.1 cents per litre.

Recent media reports are basing their findings on a weekly retail gasoline price survey of some 38 communities throughout Canada conducted by a Calgary based company, M. J. Ervin and Associates. In their most recent survey of December 22, 1998, there were reports that prices had fallen in several locations throughout Atlantic Canada by varying amounts, from 0.8 cents per litre to 2.3 cents per litre. According to this study some communities, including those in Newfoundland, failed to witness any price decreases, while several others saw price increases.

"In fact, statistics just made available to government show over the past couple of weeks, the Canadian average had decreased by 0.9 cents per litre, while prices in most communities in Newfoundland had decreased by one cent per litre: said Mr. Grimes. "Indeed, I understand that local pump prices have decreased by another cent per litre in the last several days. These figures clearly show that the consumers of the province are receiving the benefit of lower crude costs. Regulation of the industry would only increase the cost of gasoline - not lower it as suggested by others."

Grimes stated: "Government will continue to make Dennis Browne's Report available to those who are interested in obtaining the facts pertaining to this issue and the report is also available on the provincial government website." In the meantime, government will continue its monitoring process as was recommended in that report.

Media contact: Carl Cooper (709) 729-4890.

Attachment 1 - Comparison of regulated gasoline prices to actual pump prices - January 1992 - December 1998

Table 1 - Crude Oil and Retail Gasoline Price Comparison - December 1997 to December 1998

1998 01 06 3:50 p.m.