MEDIA RELEASE

Regulated fuel prices little changed after market experiences wide movement

Prices for regulated fuels in Newfoundland and Labrador will see minimal changes Sept. 15 despite the fact that the markets for refined fuel products experienced significant movement in prices over the past 30 days.

Since Aug. 12, the beginning of the period used to establish regulated prices on the 15^th of each month, numerous events have contributed to a wide range of world fuel prices. Consequently, an environment of speculation and fear over the global supply of fuel versus the ever-growing demand for it continued to flourish.

Many of the factors that have affected the world market in the past several months are still playing a major part in keeping prices at heightened levels, including:

- Middle East violence and sabotage attacks on Iraqi pipelines;

- the inability to resolve a taxation dispute between the Russian government and its top oil exporter (OAO Yukos Inc.) which many fear may be forced into bankruptcy;

- a growth in demand for fuel from countries, such as China, U.S. and India, experiencing economic booms;

- recent tropical storms in the Gulf that threatened to disrupt fuel supply production, delivery and availability; and,

- refineries operating near peak production with little room for disruption in fuel supply and questions asked as to whether or not they are meeting demand.

Perhaps the most notable event over the past 30 days occurred during the week of Aug. 16 when oil prices moved quickly and eventually reached $49 US by week’s end on the New York Mercantile Exchange (NYMEX).

The cost for crude oil is significant because it directly impacts the market prices of the petroleum products (gasoline, home heating fuel and diesel) regulated by the Board of Commissioners of Public Utilities Petroleum Pricing Office (PPO).

In the meantime, markets have continued to react upwards and downwards to news of attacks on Iraqi pipelines followed by the resumption of exports, as well as the on-again, off-again concerns over inventories. However, analysts said any recent declines in prices did little to offset the impact the dramatic highs experienced on the market (Bloomberg, Aug. 25, 2004), and inventories are once again at the lower end of the average range for this time of year (Energy Information Administration, Sept. 9, 2004).

Effective 12:01 a.m. Wednesday, Sept. 15, 2004, the maximum prices for gasoline will decrease by 0.7 or 0.8 cents per litre (cpl) – depending on the HST rounding-off effect in a particular pricing zone; diesel will rise by 0.4 cpl; home heating fuel will increase by 0.07 cpl; and residential propane used for home heating purposes will increase by 2.2 cpl.

David Toms, PPO director (acting), said it remains to be seen what will happen in the market now that the peak driving season has passed and movement toward the home heating season has started.

“Many have asked why home heating fuel prices have increased during a season when the product is not traditionally being used as much,” said Mr. Toms “That may be true at the consumer level, but the demand on the world market for oil to produce distillate fuels (home heat and diesel) has been there all along as suppliers continued to rebuild their inventories in preparation for the upcoming home heat season. It’s still too early to determine where these prices are going, as it is for any other products that we set maximum prices.”

Prices for these products will be affected by both the available supply and demand, he explained. And geopolitical events will continue to directly impact the performance of these fuels on NYMEX.

PPO WEBSITE

The public is advised that on-line information about the Petroleum Pricing Office and fuel-price regulation can now be found by visiting the Board of Commissioners of Public Utilities website at www.pub.nl.ca.

Anyone still using the website of the former Petroleum Products Pricing Commission (PPPC) at www.pppc.nl.ca will automatically be redirected to the correct website; however, the public is encouraged to update their Internet bookmarks.

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Media contact: Michelle Hicks, Communications. Tel: 1-866-489-8800 or (709) 489-8837.