Commission releases maximum fuel prices effective March 15

Though a glance out the window in Newfoundland and Labrador might paint a different picture, the peak home heating fuel demand season is considered to be nearly over on the world market.

Over the past 30 days, home heating oil inventories along the eastern seaboard (which consumes the majority of the product) have remained in the average range and have been sufficient to meet the demand.

Effective 12:01 a.m. Monday, March 15, there will be minimal changes made to the maximum prices of distillate fuels as set by the Petroleum Products Pricing Commission (PPPC). Furnace oil will decrease by 0.36 cents per litre (cpl), stove oil will drop by 0.87 cpl, whereas diesel prices will increase slightly by 0.1 cpl.

Residential propane used for home heating purposes will decline by 1.8 cpl, as inventories for this fuel continue to remain at a good range as the home heating season nears its end.

Analysts with the U.S. Energy Information Agency (EIA) state that, if conditions continue without any unexpected draws on home heating fuel in the near future, next season�s inventories should be in better shape than they were a year ago when the market was faced with a lower-than-average supply of distillate fuels following a harsh winter.

PPPC commissioner George Saunders noted that home heating oil prices in Newfoundland and Labrador from October 15, 2003 to March 15, 2004 have been consistently lower than they were during the same period last year.

"The public has had a good season in this province when it comes to home heating fuel prices," said the commissioner. "Overall, this winter has been milder than in the past, and inventories have been able to meet the seasonal demand. This has helped keep this product�s prices in check."

Mr. Saunders added that Newfoundland and Labrador prices for home heating fuel continue to be among the lowest in Atlantic Canada.

The big story over the past 30 days when it comes to refined petroleum products has been skyrocketing market prices, particularly as they related to gasoline.

As a result of this, the PPPC used its interruption formula to make an early adjustment to gasoline prices in the province March 5 because of heightened pricing activity on the world market.

However, figures overall on the New York Mercantile Exchange (NYMEX) dipped slightly from that time to March 11 (the end of the commission�s regular pricing period), and it has warranted a slight downward change to the maximum price by 0.7 cpl effective March 15.

Mr. Saunders cautioned the public that, depending on the market�s behaviour, future interruptions in pricing for any fuel regulated by the commission are possible in an upward or downward direction.

"We were not the only region that has experienced a period of high pricing when it comes to gasoline," said the commissioner. "And there is such sensitivity in the market at this time that anything can happen. If conditions meet the criteria for our interruption formula, then we will have no alternative but to adjust prices up or down before April 15. We can�t predict the future and our numbers aren�t calculated based on speculation, but we have to continue to prepare for the potential of an early change."

Some factors that have affected fuel prices over the past 30 days include:

• Low available inventory and imports, concerns about future production for gasoline that is experiencing a rising demand (due partly to a recovering U.S. economy), as well as a build-up of the strategic reserves.
• The Organization of Petroleum Exporting Countries (OPEC) may postpone a plan to lower its output quota April 1 on concern that prices will soar and threaten economic growth.
• Venezuela is going through a period of civil unrest and there has been an ongoing fear of disruptions in oil and fuel exports to the U.S. As of December, Venezuela was the fourth biggest oil exporter and second largest gasoline supplier to the U.S. market and is OPEC�s third biggest oil producer.
• China is seeing a surge in its economy and, according to reports from the International Energy Agency (IEA), this will create a large growth in world oil use. Bloomberg News reports state that China passed Japan as the second-largest oil consumer after the U.S. last year because of rising car sales and increased oil use by power generators.
• A tight supply for refiners to try to rebuild the gasoline stocks after the off-peak season has experienced a higher-than-normal demand. Refiners are soon going to shift production from distillate fuels to gasoline, and there has been a continuing concern over available supply.

1. Automotive Fuels - Maximum Retail Pump Prices - Effective March 15, 2004
2. Heating Fuels - Residential Propane - Maximum Tank Wagon Prices - Effective March 15, 2004
3. Heating Fuels - Maximum Tank Wagon (or** Tank Farm) Prices - Effective March 15, 2004

Media contact: Michelle Hicks, Communications, (709) 489-8837 or (709) 486-4789

2004 03 16                                        10:40 a.m.