Maximum prices released for regulated fuels in Newfoundland and Labrador
Numerous geopolitical and market pressures during the past 30 days continue to be reflected in the cost of crude oil and the petroleum products that are refined from it.
The Board of Commissioners of Public Utilities Petroleum Pricing Office (PPO) has determined, using the pricing data obtained from the New York Mercantile Exchange (NYMEX), that an increase in the prices for all regulated fuels in this province is warranted.
Effective 12:01 a.m. Sunday, Aug. 15, maximum prices will be adjusted upward as follows: all types of gasoline by 0.6 or 0.7 cents per litre (cpl) – depending on the HST rounding-off effect for a particular pricing zone; diesel by 2.5 cpl; home heating fuel by 1.7 cpl; and, residential propane used for home heating purposes by 2.1 cpl.
David Toms, PPO director (acting), said the reasons for the ongoing high prices for refined fuels in recent weeks remain consistent, as concerns over fuel supply and availability to the world market prevail in an environment where demand has increased and refinery production capacity is near its maximum.
“The market is reacting to the numerous pressures being placed on fuel,” noted Mr Toms. “There were a couple of periods throughout the past 30 days when fuel-market prices declined because of an ease in concern about supplies and inventories, but they were short-lived. In the end, there were longer periods of high pricing that offset any gains from lower prices. This is why the Newfoundland and Labrador fuel market will see an increase in prices at this time.
“As long as the current global situation persists with greater demands in conjunction with concerns about sufficient supplies, prices will not decline as quickly as many would hope.”
Several major events are creating fear and speculation in the markets, which in turn, are keeping prices higher and producing an unstable environment for fuel traders.
With little room to spare when it comes to available fuel and the increasing demands placed upon it, any signal of a potential disruption to supplies can trigger a pricing response in the market. A recent example was the tropical storm in the Gulf of Mexico and a hurricane in the Caribbean and southern U.S. which disrupted oil production (with the Gulf sites representing one-quarter of the U.S. oil and gas production) on the offshore platforms.
Another factor contributing to high fuel prices is the fear that exports from Russia will be interrupted as the nation’s top oil exporter, OAO Yukos Inc., battles bankruptcy. As well, the Middle East is still seeing terrorist activity and attacks on Iraqi pipelines, which could affect oil exports.
Also putting pressure on the fuel market is the presidential recall election in Venezuela, a country that is a significant supplier to the U.S. The political situation is potentially volatile and may create civil unrest and a possible interruption in fuel exports.
While Saudi Arabia, the world’s largest exporter, has stated its spare oil capacity could be made available to meet potential shortfalls in the market, OPEC (Organization of Petroleum Exporting Countries) has scheduled its next meeting for Vienna Sept. 14. One item slated for discussion is the possibility members may raise its production quotas to match current output levels in a measure to prevent further pressure in the oil market.
“All these factors are significantly impacting the prices of the different fuel products we regulate in a variety of ways,” said Mr. Toms. “Our office has to provide a balance and ensure that stability remains in the Newfoundland and Labrador market while addressing the real factors for those who purchase and supply fuel in the province. Regulation is fulfilling its mandate.”
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Media contact: Michelle Hicks, Communications. Tel: (709) 489-8837