Prices for heating fuel, diesel head in opposite directions
New Brunswick petroleum prices veered off in all directions overnight as oddities in the province's price regulation rules produced results that had the province's Energy and Utilities Board phone ringing this morning.
"People have called to make sure our numbers are right," said EUB spokesman David Young.
As expected, maximum gasoline prices inched up 1.4 cents per litre overnight, but diesel and heating oil, which New Brunswick treats as nearly identical fuels, saw prices move aggressively in opposite directions.
Diesel jumped 5.1 cents while heating oil fell by seven cents.
Special price setting mechanism triggered
Young said the difference was caused by petroleum trading in New York that triggered a special New Brunswick price setting mechanism for heating oil but not for diesel.
Normally prices for various fuels in New Brunswick are set based on the average daily trading price in New York for the previous week. However, legislation requires that practice to be discarded — or interrupted — when trading prices in New York move significantly in a single day.
On Tuesday the trading price of kerosene, which is used to determine most of the price of both heating oil and diesel during the winter, fell just enough to trigger the interruption mechanism for heating oil, but not enough to trigger it for diesel.
Consequently, heating oil prices were calculated based solely on Tuesday trading and went down, while diesel prices were calculated on a full week of trading and went up.
Squeezing local delivery companies
The drop in heating oil prices overnight has produced a surprise one-week sale on the fuel for New Brunswick consumers, but it's trouble for local delivery companies since large suppliers do not have to lower prices to them.
"Welcome to regulation in New Brunswick," said William Gould, of Fundy Energy, which delivers heating oil throughout southern New Brunswick.
Gould says although New Brunswick sets heating oil prices based on what refiners can get for their product in New York, it does not require refiners to provide those New York prices locally, causing problems throughout the system.
Refiners "charge what they want," said Gould.
On Thursday in Saint John, a variety of oil companies ignored the overnight collapse in the regulated price of heating oil and increased what they charge to heating oil delivery companies.
Overnight, heating oil picked up at the Irving Oil refinery jumped by 1.4 cents per litre even though the Energy and Utilities Board lowered what consumers can be charged for heating oil by seven cents at the same time.
Gould says that instantly squeezes local delivery companies.
"We take the loss," said Gould. "We're in the middle of winter. It's not like we can stop delivering and say, 'Look, Mrs. Jones, who lives out in central Hainesville, is going to have to freeze for a week.'"
The legislature created no mechanism to make refiners honour prices that are set by competitive trading in New York, even though prices in New Brunswick are set on the basis they will be honoured, said Dave Young, of the EUB.
Last summer, New Brunswick changed the entire heating oil pricing formula to let refiners charge more, because they were consistently ignoring the New York prices for heating oil announced weekly by the EUB.
The changes solved the problem of refiners encroaching on the margins meant for delivery companies, but added about 10 cents per litre to the price of heating oil for consumers this winter.
New Brunswick Energy Minister Donald Arseneault has promised to review those changes next summer
