NLIS 6
June 15, 2005
(Government Services)
The following is being distributed
at the request of the Petroleum Pricing Office:
Maximum fuel prices
released June 15; price freeze lifted in coastal Labrador
Effective 12:01 a.m., June 15, the
Public Utilities Board�s Petroleum Pricing Office (PPO) will adjust
the maximum allowable prices for all regulated fuels in Newfoundland
and Labrador, as well as lift the price freeze for Zones 11 (coastal
Labrador south) and 14 (coastal Labrador north).
For areas that haven�t been under a price freeze, the maximum price
for all types of gasoline will decrease by 0.6 cents per litre (cpl),
while the distillate family of fuels show nominal increases � home
heating fuel (furnace/stove oil) by 0.19 cpl and diesel by 0.9/1.0
cpl (depending on the HST rounding effect for a particular zone).
Residential propane used for home heating purposes will be reduced
by 0.8 cpl.
In Zones 11 and 14, the removal of the price freeze (see
Backgrounder), which has been in effect since November 15, 2004,
will mean that all types of gasoline in these zones will increase by
7.2 cpl, stove oil by 5.33 cpl and diesel by 8.7 cpl. The new
maximum prices are calculated based upon the current benchmark price
used for Zone 1 (Avalon) plus the costs associated with moving the
products to these areas.
Though the commodities market has experienced significant upward and
downward movements over this pricing period for petroleum products,
maximum fuel prices in this province (with the exception of Zone
10a, Mary�s Harbour to Cartwright, where the price freeze was lifted
June 1) have remained stable since they were last set on May 15.
David Toms, PPO director (acting), noted that speculation about the
future supply of refined fuel continues to weigh heavily on the
pricing behaviour of petroleum products on the New York Mercantile
Exchange (NYMEX). It is the average of these NYMEX prices and not
necessarily the price of crude oil on any given day that directly
impacts regulation in this province.
"Increased prices in the commodity market during the last two weeks
have offset earlier lows with the result being a relatively small
adjustment in regulated prices, with gasoline and propane prices
decreasing somewhat and distillate fuels (including furnace oil,
stove oil and diesel) experiencing slight increases," explained Mr.
Toms.
THE MARKETS
The beginning of this past pricing period saw declining market
figures as reports from the U.S. Energy Information Administration (EIA)
indicated that oil and gasoline supplies continued to be in a good
position to meet the summer demand.
As the weeks advanced, underlying fears continued to be reflected in
the market prices, as mixed reports came out of OPEC (Organization
of Petroleum Exporting Countries) about what it was going to do with
production quotas at its June 15 meeting in Vienna to deal with high
fuel prices. Current output is near its highest in 25 years, leaving
apprehension about spare fuel capacity and the type of oil that
would be available to make the fuel products, despite current
healthy U.S. crude inventories.
The peak demand season for gasoline is underway, and this is
expected to create a draw on existing ample supplies. However, also
on the demand side, it was reported that China, the second largest
consumer behind the U.S., may be experiencing a slower energy demand
growth, and there were expectations of slower global economic
growth.
Diesel fuel is experiencing an increase in demand. This is of
particular concern because No. 2 furnace oil and diesel (low-sulphur
No. 2) are both members of the distillate family of fuels, and
current inventories are in the lower end of the average range. Major
draws on distillate fuels, should refineries not sufficiently
rebuild inventories for these products in the coming months, could
result in a tight supply later in the year when the northern
hemisphere enters its winter season.
On the supply side, there were several refinery issues because of
unscheduled shutdowns, or those undergoing routine maintenance and
difficulties during restarts. Refinery output is at a high level in
a tight market, creating anxiety that the market may not be able to
compensate for many possible disruptions to supply or production.
This could enhance the long-term price volatility of refined
petroleum products.
Also impacting market-pricing behaviour is the concern from
forecasters about the impact hurricanes and tropical storms may have
on oil production and supplies this season. The first major storm of
the season, Arlene, made its way through the Gulf of Mexico last
week, reminding traders about the large amount of damage caused by
numerous storms in that area last year and the lasting impact it had
on the fuel market.
BACKGROUNDER
The price freeze in certain areas of
Labrador was first established in November 2001, and was formulated
based on extensive consultation with stakeholders.
The freeze usually coincides with the beginning and end of the
shipping season, and specifically affects PPO Zones 10a (Mary�s
Harbour to Cartwright � road connected), 11 (coastal Labrador south)
and 14 (coastal Labrador north).
The PUB adjusts fuel prices on the 15th of each month using the
average daily prices for finished petroleum products as listed on
NYMEX (New York Mercantile Exchange). Illustrated in the following
four graphs are the market-price performances of the products
regulated by the PPO, for recent regularly scheduled pricing periods
up to June 10, 2005:
Media contact: Michelle Hicks, Communications. Tel: 1-866-489-8800
or (709) 489-8837
1. Automotive Fuels - Maximum Retail Pump Prices - Effective June 15,
2005
2. Heating Fuels - Maximum Tank Wagon
(or ** Tank Farm) Prices - June 15, 2005
3. Heating Fuels - Residential
Propane - Maximum Tank Wagon Prices - Effective June 15, 2005.
2005 06 15
12:10 p.m. |