NLIS 5
February 28, 2005
(Government Services)
The following is being distributed
at the request of the Petroleum Pricing Office:
Petroleum Pricing
Office uses interruption formula to adjust diesel, stove oil prices
Effective 12:01 a.m. Monday, February
28, the Public Utilities Board�s Petroleum Pricing Office (PPO) has
determined that the maximum price of automotive diesel will increase
by 3.3 cents per litre (cpl) and stove oil by 2.44 cpl, except in
regions where a price freeze is in effect.
The criteria for interruption were not met for the other fuels
regulated by the PPO, and there will be no changes to their maximum
prices unless or until the criteria are realized for these
individual products.
David Toms, PPO director (acting), explained that the significant
pricing advance for crude oil and its refined products on the New
York Mercantile Exchange (NYMEX) over the past week was triggered by
several global events, with the most prominent being a recent bout
of cold weather on both sides of the Atlantic.
In the days leading up to the weekly U.S. energy report February 24,
the fuel market gathered momentum on the belief that inclement
weather in Europe, the U.S. northeast and Atlantic region may have
drawn on the available supplies of distillates (home heating fuel
and diesel) in order to meet the increased demand. Low-sulphur
diesel and home heating fuel, such as stove oil, belong to the same
group of fuels and are ultimately impacted by many of the same
pricing pressures.
The Energy Information Administration�s (EIA) report indicated
increases in crude oil and gasoline inventories (though they weren�t
as much as expected) and a decrease in distillate stocks. When
coupled with a NYMEX crude oil price of more than $50 for several
days, the resultant impact was an upswing in refined product prices
that were sufficient for the PPO interruption formula to be
implemented.
Also influencing fuel prices was the concern that OPEC (Organization
of Petroleum Exporting Countries) may reduce its output once members
meet again in Iran next month, during a time of increasing global
demand, in order to avoid a potential future price collapse. There
are reports that non-OPEC oil-producing countries are slowing their
output growth, which means OPEC members would have to produce as
much as it can in order to meet the demand. This leaves little spare
production capacity in the event of any supply disruptions and
additional increased market pressure.
BACKGROUNDER
PPO benchmarks are established based
on the average prices of refined products in the
period since the last time maximum prices were established.
For the interruption formula to be used on gasoline and distillate
fuels, the PPO requires the average of market prices to be 3.5 cpl
greater or less than the current PPO benchmark prices (except
propane, which requires +/- 5.0 cpl) over five market business days.
As well, the interruption formula will only be used five days after
the last pricing adjustment, and as long as making the change
doesn�t interfere with the regular pricing schedule.
Illustrated in the following five graphs is the market-price
performance of diesel fuel and stove oil for recent pricing periods
up to Feb. 25, 2005, as well as the other fuels regulated by the PPO:
Media contact: Michelle Hicks, Communications. Tel: 1-866-489-8800
1.Automotive Fuels - Maximum Retail Pump Prices - Effective February
28, 2005
2. Heating Fuels - Maximum Tank Wagon (or ** Tank Farm) Prices -
February 28, 2005
2005 02 28
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