May 3, 2004
The following release is being distributed at the request of the Petroleum Products Pricing Commission:
Commission makes early adjustment to maximum fuel prices
The volatile world market continues to play a significant role in elevating fuel prices, and it is unknown if there will be any relief in sight.
But one thing is for certain, noted the head of the Petroleum Products Pricing Commission (PPPC) George Saunders, if Newfoundland and Labrador didn�t have regulation in place, the prices for petroleum products would likely have increased sooner, more frequently, and by substantial amounts.
The PPPC has stated in the past that there could be periods when interventions in the regular pricing schedule would occur if the guidelines for its interruption formula to address sudden and sustained price spikes are met. For all types of gasoline and distillate fuels (furnace/stove oil and diesel), this means prices would have to move an average of 3.5 cents per litre (cpl) upward or downward over a five-day period before any adjustments are made.
Currently, an early interruption on the prices for gasoline and No. 2 blend furnace oil is warranted.
Effective 12:01 a.m. Monday, May 3, furnace oil prices will increase by 3.21 cpl and all types of gasoline will move upward by 3.0 cpl.
And while there is no change in the prices of other fuels regulated by the PPPC at this time, Mr. Saunders advised that, given the present vulnerability on the world market, it is possible for future interruptions to occur on any fuel in either direction.
"We continue to go through a period of extreme uncertainty in the markets," said the commissioner. "We know consumers will find it difficult to know they are paying more for commodities that are already at high levels, but we don�t set the agenda for the world situation. The reality is we have to respond on a discretionary basis when there are notable price spikes up or down and ensure it is passed along to the market in a timely manner. Keep in mind, this only happens when the market experiences extreme fluctuations; otherwise, the regulatory system has been able to maintain overall stability in Newfoundland and Labrador fuel prices."
When it comes to gasoline, the prices are escalating in every market for several reasons, including a drop in imports and lower-than-expected gains in inventories being outstripped by increased demand. This results in a tight gasoline market. Buffering that demand is the upswing in China�s economic growth (more than double the rate of the U.S. in the first quarter and surpassing Japan as the second-largest oil consumer last year because of rising car sales and increased use of oil to fuel power plants � Bloomberg News, April 29), along with the uncertainty of fuel supply from Iraq because of the continued turmoil.
Mr. Saunders explained there are two factors at work when it comes to the increases in furnace oil � the overall price of refined petroleum products in the marketplace and the increased price for jet fuel.
Jet fuel is a factor in the price for furnace oil in Newfoundland and Labrador because oil companies in this province blend this fuel with their home heat products to allow for improved performance during the colder months, and the process places an additional cost on the fuel. This past winter, the PPPC began incorporating the jet fuel blend into furnace oil prices beginning November 15, and it will remain in effect until June.
The market has seen a heightened price for oil on the world market, coupled with concerns about supply availability. Although there has been a decrease in demand for home heating fuel itself, the subsequent reduction in supply has more than offset this factor, and the jet fuel blend component is playing a major part in driving prices.
The recent upswing in the U.S. economy has meant an increased amount of air travel, and that, in turn, has placed a pressure on the demand and price for jet fuel.
And unless the overall situation recedes significantly, noted Mr. Saunders, vulnerability in prices will remain. The PPPC will notify the public in the event other changes in pricing occur.
Media contact: Michelle Hicks, Communications Officer. Tel: 1-866-489-8800 or (709) 489-8837.
2004 05 03 10:40 a.m.