December 14, 2001
(Government Services and Lands)


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

The Petroleum Products Pricing Commission has released the prices for all brands of gasoline, diesel fuel, furnace oil, stove oil, and for the first time, propane heating prices, effective December 15 for all zones in the province exclusive of the Labrador Coast.

Gasoline Prices Decline
A further reduction of approximately 2.7 cents per litre (cpl) is effective for all brands of gasoline as of 8:00 a.m., Saturday, December 15, 2001, and will continue in effect until mid-January 2002. For some urban areas of the province, this reduction will see no change at the pumps because reductions have been passed on to the consumer during the past month. However, this only applies to a few major urban centres. Most of the province will experience the reductions established by regulation. It is to be emphasized that these prices are maximum levels only, and that dealers and companies are free to sell below these regulated prices, as they have in St. John's and a few smaller urban centres during the past two months.

Home Heat Prices Decline
Stove oil and furnace oil will also be decreased by 3.6 cpl effective December 15, 2001. This represents a significant decline in home heating prices over last month, and reflects the sharp decline in world prices. HST is added to the price of home heating fuels posted in our tables. This represents a significant decrease in home heating fuel prices as compared with the same period last year, and will result in increased savings to many Newfoundland and Labrador families.

Regulation of Propane for Home Heating Purposes
The commission is using the following definition for propane used for home heat:

Propane that is delivered to a consumer's household by tank-truck into fixed storage and which is used by an appliance designed and intended to generate heat for the residence. Such appliances are furnaces, space heaters, and fireplaces equipped with heat blower fans. Fixed storage is defined as one, or an interconnected number of storage tanks approved and certified for propane use, with a total capacity of 178 litres (200 pounds or greater).

The benchmark used for regulation of propane for heating purposes is the average weekly contract rack price for propane at Sarnia, Ontario as published by Bloomberg Oil Buyer's Guide (OBG). It is currently the average of four suppliers of propane at Sarnia. 

In normal situations, all three current retailers of propane in the province are mainly supplied via rack pickup at the Come By Chance refinery, and redistributed to storage depots located near major population centres on the island of Newfoundland. Propane is not supplied for residential purposes in Labrador at present.

In establishing maximum prices for residential propane effective December 15, 2001, the base prices used for purposes of zoning differentials was therefore that estimated for the Come by Chance area. Considering trucking and storage depot operation, this provided for a price reduction of 2 cpl less than the historic average of the Avalon Peninsula area.

We have maintained the same zonal structure as is in effect for gasoline and other home heating fuels. Price differentials vary depending on transportation and storage costs which are considered to be supplied from Come by Chance refinery. If supplies of propane change to an alternate source for product in the future, the commission will consider such changes as they occur.

Propane prices for heating purposes are also subject to the same seasonal fluctuations as furnace oil and stove oil. In addition, propane is subject to sudden increases called "spiking". This phenomenon occurred last winter between December 2000 and February 2001. We have made no allowance for such spiking of prices. However, the commission will monitor this spiking closely, and will endeavour to make adjustments that are reasonable at a time these spikes might occur.

Propane is regulated in only 10 zones, as it is unavailable in many areas of the province. The benchmark used to establish the base price was the average OBG weekly contract price for the four week period ending Thursday, December 6, 2001. These prices result in reductions on the current prices for propane in most locations, and will remain in effect until mid-January 2002.

The price of petroleum products worldwide continues to decline as economic circumstances remain in recession, major security risks are felt throughout the free world, and the war on terrorism continues. Therefore, the Petroleum Products Pricing Commission will continue its vigilant monitoring of all prices on a daily basis, and make adjustments accordingly.

The commission is pleased with the responsible conduct of the companies in lowering their prices as declines occur in major market areas, but is disappointed that such reductions were not put into effect across the province. This confirms the necessity of the pricing commission, so that fair and stable pricing can be applied throughout Newfoundland and Labrador on a regular basis. The model adopted by us is working and is an endorsement of the commission's work as we continue to bring stability and fair market prices to the people of Newfoundland and Labrador.

Media contact: George Saunders, Commissioner, (709) 489-8877 or 1-866-489-8800.

Automotive Fuels - Maximum Retail Pump Prices - Effective December 15, 2001
Heating Fuels - Residential Propane - Maximum Tank Wagon Prices - Effective December 15, 2001
Heating Fuels - Maximum Tank Wagon (or Tank Farm) Prices - Effective December 15, 2001

2001 12 14                          4:25 p.m.

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