Petroleum Pricing Office interrupts normal pricing schedule for gasoline
For the second time in as many weeks, the Board of Commissioners of Public Utilities Petroleum Pricing Office (PPO) has used its interruption formula in the Newfoundland and Labrador (NL) regulated fuel market.
Effective 12:01 a.m. Friday, Oct. 1, 2004, the maximum price for all types of gasoline will increase by 2.6 cents per litre (cpl). There will be no adjustments made to other fuels regulated by the PPO at this time.
David Toms, PPO director (acting), explained that like the conditions that required an early adjustment for distillate fuels (home heat and diesel) this past Sunday, gasoline prices were similarly affected on the New York Mercantile Exchange (NYMEX).
Record-breaking high crude prices (with a $50 US barrel this past Monday on NYMEX during after-hours trading and again Tuesday during regular hours) have factored heavily into the prices for refined oil products, and that activity helped to sustain the volatile fuel market enough to lead to price interventions in NL’s regulated system.
Mr. Toms said ongoing global problems contributing to the imbalance between the demand and supply conditions for fuel continue to be central to market-price behaviour.
World demand for fuel has increased with economic growth, particularly impacted by China’s progress. Given there is little spare capacity to expand production of crude, concerns over supply availability have resulted.
Other factors on the supply side that have complicated pricing include: Middle East tension, particularly in Iraq; unresolved fears of supply disruptions from Russia, the world’s largest oil exporting country; and, recent tropical storms in the Gulf damaging oil platforms and hindering deliveries and production.
But the latest event compounding these circumstances is the threat of civil unrest in Nigeria, which is the Organization of Petroleum Exporting Countries’ (OPEC) fifth largest supplier of oil to the U.S. market this year and Africa’s top oil producer. There, rebels may target oil production at a time when analysts say the market can ill-afford to lose any fuel and increased security measures have been taken.
“Indeed, world markets are very volatile due to tight supply and higher demand,” said Mr. Toms. “Recent price changes for the NL markets were justified based on this and not subjective reasons, and ensures all stakeholders in this province are treated fairly in the process of regulation.”
The PPO uses its interruption formula whenever market prices for regulated fuels meet a certain criteria, provided making the early adjustment doesn’t interfere with the regular pricing schedule.
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.
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Media contact: Michelle Hicks, Communications. Tel: 1-866-489-8800 or (709) 489-8837.