Independent consultant recommends fuel margins to increase by about 2 cents

·2 min read
In a report commissioned by IRAC for its first full margin review since 2012, fuel market consultant Kalibrate said the retail margin for diesel and gasoline should be increased. (Dan McGarvey/CBC - image credit)
In a report commissioned by IRAC for its first full margin review since 2012, fuel market consultant Kalibrate said the retail margin for diesel and gasoline should be increased. (Dan McGarvey/CBC - image credit)

An independent consultant is recommending the Island Regulatory and Appeals Commission to increase fuel profit margins, a move which would lead to prices increasing at the pumps.

In a report commissioned by IRAC for its first full margin review since 2012, fuel market consultant Kalibrate said the retail margin for diesel and gasoline should be increased by 1.93 cents per litre to account for a rise in operating costs between 2018 and 2021.

It said wholesale margins, which haven't been raised in 18 years, should also rise 2.01 cents.

For furnace oil, Kalibrate recommended margins for all providers to increase by 1.63 cents a litre.

IRAC's director of regulatory services, Allison MacEwan, said the changes — if approved — would certainly mean Islanders would see fuel prices rise.

"Costs certainly have increased and we have seen pressures that have led to closures of outlets, whether they, again, be service station outlets or whether they be restaurants or or other types of businesses," MacEwan said.

"So the cost of doing business, I guess, is what we're dealing with here."

Fuel prices in P.E.I. hit record levels this spring as Russia's invasion of Ukraine continues. They have been a major factor in making P.E.I.'s inflation rate the highest in Canada.

MacEwan said the nature of those increases is not the same as the ones that would be triggered by the update to margins.

"These are more structural, if you will, business-related increases and are really necessary in order to ensure that the product is made available to you and I whenever we need gasoline or furnace oil and such," he said.

"It's designed to ensure that the various industry participants, whether they be wholesalers or retailers, are allowed to earn compensation. That continues the availability of gasoline on the Island."

Kalibrate didn't factor in acquisition costs in its recommendation for motor fuel price increases due to lack of quality data, though this would just have added to the suggested increases.

Comments on the recommendations are being accepted until Aug. 15. The full report is available on IRAC's website.

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