October 15, 2002
(Government Services and Lands)


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

Commission releases Marine Tanker Freight Cost Study results

The findings of a Marine Tanker Freight Cost Study have been presented to the Petroleum Products Pricing Commission (PPPC).

The report, completed by Myers Consulting of St. John�s in September, was initiated by the PPPC as part of its mandate to conduct research into the pricing components of regulated fuels. This is the initial phase of an overall transportation, storage and distribution cost study, which analyzed the movement of petroleum products into the province. The focus of this particular study was an investigation of the cost differences of moving products from supplying Canadian refineries to primary marine terminals around Newfoundland and Labrador.

George Saunders, PPPC commissioner, said a comprehensive study is necessary to ensure fairness to both consumers and product suppliers with respect to zone pricing differentials throughout the province. He said a number of consumers from various parts of the province claim that differentials between zones are too high, while some suppliers maintain they are not sufficient to cover the additional costs involved, particularly in servicing more remote areas.

After carefully examining the report, Mr. Saunders decided that effective October 15, 2002, there will be a one cent per litre (cpl) before-tax price reduction for gasoline, diesel and home heating fuels in Zone 6, which includes Corner Brook / Bay of Islands, Deer Lake and Gros Morne as far north as Lobster Cove. The change will bring petroleum prices for this Zone on par with those in Zone 1 (Avalon Peninsula).

"This commission is operating in a completely transparent manner, and any time we find something that could alter an unfair position for the consumer or the oil companies we will act on it as long as there is sufficient evidence to support a change," said Mr. Saunders.

In light of the report and its recommendation regarding Zone 6 pricing, the commission further examined any necessary adjustments to prices for communities in the outlying areas adjacent to Zone 6. A review of the information led Mr. Saunders to decide that a temporary downward adjustment of 0.5 cpl should be implemented for these zones.

Areas affected by this adjustment include: Zone 5 (Springdale � Green Bay / Triton / Baie Verte Peninsula), Zone 7 (Stephenville / Port au Port / Codroy Valley / Channel Port aux Basques / Burgeo), Zone 7a (Ramea) and Zone 8 (Northern Peninsula � Lobster Cove / Gros Morne / Bellburns).

The reason for these modifications is the strategic position of Corner Brook as the main supply terminal for these zones. Mr. Saunders stressed the 0.5 cpl change is an interim measure. He agrees with the Marine Tanker Freight Cost Study recommendation that a further comprehensive analysis of land transport and distribution costs for petroleum products throughout all provincial zones is necessary before any further major changes are made to zone price differentials.

The next phase of research will take place in the new year.

Media contact:

Michelle Hicks
Communications officer
Petroleum Products Pricing Commission
Tel: 1-866-489-8800 or (709) 489-8877
Fax: 1-866-489-8879
Cell: (709) 486-4789 (voice mail available)

2002 10 15                                        5:20 p.m.

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