Fuel price adjustments are hard on budgets
By Jaymie White
Local Journalism Initiative Reporter
WEST COAST — On Tuesday, Feb. 21, gas prices went up three cents. On Thursday, they dropped back by four cents. With winter in full swing, households that rely primarily on oil heat are also having an increasingly difficult time keeping up with the high and fluctuating fuel prices.
Each Thursday, the Public Utilities Board (PUB) issues an adjustment for petroleum products, but unscheduled adjustments have left consumers at a loss, unable to properly budget or schedule fill ups.
On Friday, Jan. 27, the PUB issued a statement regarding what was referred to as an ‘extraordinary adjustment of maximum prices of certain regulated petroleum products,’ which saw diesel motor fuel increase by 35.2 cents per litre (cpl), furnace oil heating fuel increase by 30.48 cpl, and stove heating fuel increase by 41.98 cpl in Zone 13 (Western Labrador) and 13a (Churchill Falls).
This increase took place just one day following the scheduled price adjustments, representing yet another blow to those households who had not filled up within that 24-hour window. The PUB offers a breakdown of how their prices are set online at pub.nl.ca.
Maximum pricing components are separated into four categories: Benchmark Prices, Total Allowed Markups, Zone Differentials, and Taxation.
Benchmark Prices come from data sources prescribed in legislation. Scheduled adjustments are changed weekly on Thursdays, a 7-day average of pricing data is used, and the average is converted to Canadian cents per litre.
Total Allowed Markups are the sum of wholesale markup and retail markup and they are not changed weekly.
Zone differentials reflect incremental costs of storage and distribution of products to pricing zones and are also not changed weekly.
Taxation includes, provincial fuel tax, federal excise tax, carbon tax, and harmonized sales tax.
Maximum prices are the sum of all four of these factors, which gives the price that individuals see at the pump and on their home heating fuel.
The timing of max price adjustments for petroleum products are scheduled to take place weekly, every Thursday, and are based on an average of the daily benchmark prices over the period from the previous Wednesday to Tuesday. The weekly maximum price adjustments come into effect on Thursday, at 12:01.
When the Board became responsible for price regulation in 2004, maximum price adjustments were made once a month. In 2006 it was changed to bi-weekly, and the current weekly adjustments were put into place in 2010.
These adjustments can be properly budgeted for as an increase/decrease is anticipated each week, but when extraordinary adjustments take place outside the scheduled weekly adjustments, that becomes more difficult to accomplish.
An extraordinary adjustment of maximum prices outside of the scheduled weekly adjustment may be made by the PUB when they determine it is necessary to change maximum prices to provide for the recovery of the costs of supply, or to ensure that consumers do not pay more than necessary to provide for recovery of these costs.
In Newfoundland and Labrador, these adjustments are considered when there is a difference of +/- 6 to 8 cents per litre between the daily average benchmark price or the running average benchmark price compared to the established benchmark price.
In response to email inquiries, the PUB issued the following statement regarding the unscheduled increases late last month.
“The increases to the Board’s maximum prices for diesel motor fuel and furnace oil heating fuel effective January 27, 2023 were the result of significant increases in the blended benchmark prices for the products based on Platts US MarketScan reported market data. In particular, New York Harbour Jet and Ultra Low Sulfur Kerosene (ULSK) prices reported by Platts, which are used as 75 per cent of the blended benchmark price for furnace oil heating fuel and diesel motor fuel, respectively, increased substantially driven, in part, by supply constraints in New York Harbour for those products.
“The substantial increases in prices in New York Harbour for Jet and ULSK occurred on Wednesday, January 25, 2023 and this data would not have been included in the average benchmark price calculation for the January 26, 2023 regular weekly adjustment. Generally, scheduled weekly adjustments are based on data from Wednesday of the prior week to Tuesday of the change week, which in this case, captured some of the increase in these products. However, the significant increase in the first day of the new data group resulted in an extraordinary adjustment.”
The PUB added that prices are determined by several factors that are impossible to predict.
“Commodities, such as crude oil and gasoline, are traded on the global market and their prices are largely influenced by factors not solely related to the fundamentals of regional demand/supply, but also by the many geopolitical events, military activities, natural disasters or other major events that can occur internationally. News of events that can affect output or refining capacity may also affect fuel product value and perceived supply availability globally, or conversely, any event that reduces apprehension in the marketplace may contribute to lowering prices.”
MHA Tony Wakeham (Stephenville – Port au Port) said the lack of consistency with fuel price adjustments is a major issue for residents.
“The frustration is with the ever-changing pricing. When this was first established and we were talking about regulated gas prices and fuel prices, everybody knew there was always going to be a price adjustment on a Thursday, and so people anticipated that the price would either go up or down,” explained Wakeham. “But now, the PUB for some reason have decided they aren’t going to have that consistency anymore and they basically make announcements on the Thursday and can make another one the day before or on the Friday, for example, and it catches people off guard.”
Wakeham doesn’t understand how a significant adjustment can take place so close to a scheduled adjustment without the PUB being aware of pertinent information prior to that.
“I find it hard to believe that you can regulate a price adjustment on a Thursday and less than 24-hours later you’re making another significant adjustment to it. That’s what got people upset, and rightly so, because does the PUB have the information ahead of time? Did they know it, and why did they wait an extra day to make an announcement? While I understand the volatility of the prices in the marketplace, there seems to be more consistency in other provinces right now, and people would like to be able to take advantage of a savings if there is one coming, but the PUB doesn’t seem to want to let people know that and I’m not sure I understand the rationale.”
Wakeham believes that, with transparency and consistency, people will be able to better budget for essential fuels.
“There’s an onus on the PUB to keep prices at a certain level and to respond to the market volatility. But to turn around and almost act in secret, for lack of a better word, when it comes to revealing what the prices may or may not be, holding off on making announcements sometimes seems to be a part of that process,” said Wakeham. “I think what people are looking for is more clarity from the PUB in terms of weekly adjustments and more transparency from the PUB in terms of how they do it.”
Jaymie White, Local Journalism Initiative Reporter, Wreckhouse Weekly News