March 15, 2003
(Government Services and Lands)

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

Regulation prices set for March 15 - April 15
Review recommendations in effect on go forward basis

The economic rule of supply and demand factors heavily into the prices of regulated petroleum products in Newfoundland and Labrador for the next period of pricing.

The northeast regions of the United States and Canada, including Newfoundland and Labrador, have experienced extremely cold temperatures during the past month, and the demand for products, particularly distillate fuels (home heating oil and diesel) and propane, have contributed to the rising prices for these fuels on the world market. Therefore, supplies have been strained because of this increased demand.

Petroleum industry analysts are saying that the global situation, particularly as it relates to politics and military activity, will determine the cost of gasoline and other fuels in the foreseeable future. Looking across the country, unregulated markets have seen all-time highs when it comes to gasoline and other consumer fuels.

But Commissioner George Saunders said that pressures have been placed on prices in the world marketplace. He cautioned the public that ongoing events, such as the expectations of war in the Middle East and the impact of the general strike in Venezuela (which nearly paralyzed petroleum production and exports) will continue to play a dominant role in escalating the prices for these products on the world scene, and people in the province should be prepared for that.

Effective 12:01 a.m. March 15, the maximum selling price for regular unleaded gasoline will increase by 4.4 cents per litre (cpl) - this includes a market average of 2.9 cpl as well as the 1.5 cpl increase in the benchmark price announced in the commission's review March 14.

Home heating oil prices will adjust upwards - furnace oil by 7.01 cpl and stove oil by 6.53 cpl, while the price for diesel will rise by 8.4 cpl. Residential propane used for home heating purposes, which is regulated based on Sarnia rack prices, will change by 11.1 cpl.

"The prices for fuel for the next pricing period are a reflection of the world situation and where the marketplace has been heading," said the commissioner. "I realize that many areas will see gasoline prices break the 90-cent mark, but I also remind the public that these are extraordinary times and this province isn't immune to world events. Because of regulation, the people in this province have been insulated from the dramatic fluctuations in world prices for the past month, and unregulated markets are a fitting testimony to what's happening to fuel prices."

From a business perspective, high daily rack prices over any sustained period, which have occurred during the past 90 days, greatly impact the ability of resellers in the province to operate their businesses. They are placed in a position where they purchase fuel from oil suppliers at prices higher than they can sell it for in the regulated market. This means their operating margins are in the negative, and they either lose money on each delivery or they have to cut off supplies to their retail accounts.

Mr. Saunders said the commission recognized this difficulty and realized it had to do something in order to prevent this margin squeeze in the future.


The PPPC released the recommendations and actions from its internal review March 14, and they are now in effect.

The two-month review, which began Jan. 8, 2003, was carried out to address issues as they pertain to regulation and the legislation governing it.
Among the recommendations in the review are:
  • An increase of 1.5 cpl for the base price for gasoline over New York Harbour benchmark pricing;

  • No changes to the margins currently allocated to retailers;

  • The introduction of an interruption formula to address any major price spikes, both sudden and sustained increases or decreases in the benchmark price used for fuel;

  • A change in the methods used to calculate the base price of furnace oil: industry practice has been to blend jet fuel or stove oil with furnace oil in order to make the fuel suitable for storage and use in cold temperatures, and future regulated prices will use the weighted average of the two fuels between Oct. 15 and April 15 annually;

  • Zones 6 and 8 boundaries will revert to the descriptions they had prior to Sept. 15, 2002: the definition for Zone 6 now reads Deer Lake, Corner Brook and Bay of Islands, while Zone 8 will be described as Northern Peninsula /Gros Morne National Park to Bellburns; and,

  • A request has been made to the Government Services and Lands minister to amend the Petroleum Products Act to include resellers and present these amendments to the House of Assembly as soon as possible.

The entire review report can be obtained by visiting the provincial government Web site at: under March 14 releases

Media contact: Michelle Hicks, communications officer. Cell: (709) 486-4789 (voice mail available)

1. Automotive Fuels - Maximum Retail Pump Prices - Effective March15, 2003;
2. Heating Fuels - Residential Propane - Maximum Tank Wagon Prices - Effective March 15, 2003;
3. Heating Fuels - Maximum Tank Wagon (or ** Tank Farm) Prices - Effective March 15, 2003

2003 03 13      9:30 a.m.

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