"Nothing doin" budget for gas or heat users

Seems that every budget day, motorists in this province, and indeed across the country, are feeling a little left out when the good times are rolling.

Such has been the case for both the federal and provincial budgets, both of which were abject disappointments when it comes to some form of pricing relief.

Neither budget adressed the issues of high taxation on a commodity that has experienced rapid increases that far outweigh the rate of inflation. Prices aren't going to ease anytime soon either, in case you were wondering. My numbers are still reflecting anywhere between $1.22 to $1.31 a litre for regular unleaded gasoline by the first week of July here in Newfoundland and Labrador.

Here in Newfoundland and Labrador, gasoline taxes amount to almost 16.5 cents on a litre while the sales tax component averages half that again. Last year, the province collected close on $142 million in motive taxes and only invested close on $66 million back into road and ferry infrastructure, a far cry from the amount collected neddless to say.

Is this fair?

I think not...

If you're going to collect a tax for a specific intent, then collect it and SPEND it for it's intended purpose. Don't tell me that the people of Labrador aren't worth hard surface instead of a chip seal experinment. Don't tell me that the province has to wait for something to happen in the west bound lane of the Harbour Arterial road before proper dollars are spent and we see a full accounting of road work...

Heating oil users in Canada this coming winter are going to be in for a shock when they go to fill their tanks. We're not seeing spot prices fall back in the non-demand season for the fuel when it should be. Spot prices are now just slightly below those of last year and just aren't falling back the way they used to a couple of years ago.

Spots for gasoline exceed those of May month last year by something like four cents a litre.

Call me crazy... But in yesterdays budget, would motorists and energy users be better served by a tax break on any motive fuel and a complete removal of the province's taxation component off all forms of heat?

If the province wants to preach about taking charge of it's own house, then why didn't it start with breaking the HST Agreement of 1998 and enter into a "control" of it's own fiscal regime? Why can't we call our own shot on most taxes here in the province and give everyone a break on taxes that are collected at the sales tax level rather than the income tax level?

It sounds a lot easier to do that across the board rather than see income tax breaks that rival the equalization formula.

Income tax or equalization. Can any of us figure out how either works?

Maybe budget time should be turned into something tangible next time. You know...Something we can all sink our teeth into...

Regards,

George

Answers from natural resources minister, Gary Lunn

Last month I told you all about a letter I wrote to the natural resources minister in the light of supply failures in Central Canada and what should be done in Canada as a whole, to answer the supply situation.

That can be found in my March 05, 2007 posting...

The letter was also intended to serve to set up an energy clearing warehouse and an inventory reporting system much like the "Energy Information Administration" in the United States.

Here's his reply dated April 12, 2007...

Dear Mr. Murphy,

Thank you for your recent letter regarding the tight supply of gasoline and related commodities. I appreciate the opportunity to respond to your questions and concerns.

I realize the difficulties caused by the recent fuel situationin Ontario.Throughout this period, Natural Resources Canada (NRCan) has worked closely with industry and the province to monitor the situation and do whatever was necessary to ensure adequate supplies were available to consumers. In addition, I certainly understand your concerns and those of other Canadians with respect to the negative impacts of increases in energy prices. Higher prices for these and other important commodities raise the cost of living for everyone.

While it is true that the Canadian refining sector has undergone significant rationalization in the last three decades, Canadian markets remain well supplied. Changes in the industry served to make the market more cost effective by closing down small inefficient facilities, which could not have been economically retrofitted to acomodate Canada's cleaner fuel standards and replacing them with new larger installations. Today, canada has more than double the refining capacity at its 19 refineries than it had when there were 44 refineries in the 1960's.

Although the economics would favour new capacity additions, there are a number of competing priorities for these investment dollars. Refining is a capital-intensive business that requires ongoing investment to remain competative. Over the last decade, most new investment dollars have been spent on refinery modifications to implement environmental initiatives and regulations, and to reduce energy intensities.

Industry decisions to construct a new refinery will be based on the perceived long-term economic returns. The slight increase in profit margins that refiners are now seeing is creating an incentive to invest in new capacity. Currently, Shell Canada, Irving Oil and Newfoundland and Labrador Refining Corporation have put forth proposals to build new refineries in Canada. Other companies are evaluating the possibility of expanding current refining capacity. However, these initiatives will take several years to be realized.

Although consumers in Southern Ontario were inconveienced by the decreased availability of petroleum products in February and early March as a rsult of refinery problems and distribution issues, there was always enough supply to meet the demand. This reflects the fact that all suppliers maintain inventories to bridge supply gaps when such unforseen events occur. Companies will always be cautious in drawing down stocks at the onset of a problem until the arrival of new supplies is more certain. Companies always ensure that they always maintain sufficient prduct to supply emergency vehicles and essential services.

Throughout the last few weeks, the government of Canada has worked with the industry and the provinces affected to mitigate any shortages. The Government is committed to ongoing collaboration with all interested parties to ensure adequate supply of petroleum in the interests of all Canadians.

Canada's energy policy continues to have its basis in a freely functioning , open market where companies are free to make business decisions within the regulatory framework that is designed to protect current and future Canadian interests. We consider that prices set in free and competative markets represent the best signals to producers in terms of their investment decisions, and to consumers in terms of the type of energy they use and how they use it. This helps to ensure that sufficient supplies are available at the most competative price.

Statistics Canada collects and compiles a wide variety of petroleum data relating to production and consumption. Tjhis data is available publicly through Statistics Canada's monthly Supply and Distribution of Refined Petroleum Products in Canada publication. The latest addition is available at the following web site:

http:www.statscan.ca/bsolc/english/bsolc?catno=45-004-XWE

For further weekly petroleum pricing, information on oil and petroleum product markets and ways to manage energy costs, I encourage you to visit NRCan's Fuel Focus website at www.fuelfocus.nrcan.gc.ca.

Again, thank you for writing on this important matter.

Yours sincerely

Minister's signature

Prices to drop slightly...

Nothing to get excited over when "supply and demand" are manipulated

Looks like consumers in Newfoundland and Labrador will see some kind of relief, but it's nothing to get excited over...

Gasoline should drop by something in the order of 6/10ths of a cent while stove oils should drop somewhere in the order of 3/4 of a cent on a litre.

Continuing draws against inventories, consumer demand are among the factors. Look as well to Nigeria, Iraq, Iran and the list goes on...

Look at refiner capacity though, when you think about draws on inventory. I look at those numbers from the Energy Information Administration on a regular basis and what they see is not what is reported to the consumer in such a way as to be understood.

There is a "fine line"...

See...It's like this. When I see that refiner capacity is down and I see that the consumer is drawing on present refined inventory, it's only normal to assume that pricing on any product will go up. In this case, I think that Big Oil knows that and plays with "capacity" on a regular basis.

Why wouldn't they?...

If you knew that everyone would pay more for a product if you slowed down production, wouldn't you slow production? That means you could save on labour, electrical costs and, in general improve on your bottom line-your shareholders would love you for it.

You know that the world is thirsty and you know that you have what they want. If you can hide behind the excuse of "maintenance" then why not? Seems like refinery maintenance takes longer than it used to. It's been several weeks now and no great increase in "capacity".

Either way we look at it, the rules of "supply and demand" have been successfully manipulated and there's no Competition Act in Canada to protect the consumer from that.

Regards!

George

Price for gas to increase in Newfoundland and Labrador

Houston, we have a problem...

Unlike the Apollo mission those many years ago, what we are witness to is a supply/demand market that needs a little oxygen, something it hasn't had in a long time...

Newfoundland and Labrador consumers will be subject to another increase at the pumps come this Thursday morning. Another 3.4 cents on a litre to be exact.

Stove oils are pointing down only slightly, with 13 days out of a possible 14 days measured. That could even be gone by the end of the day barring any divine intervention, not likely to happen with Easter gone!

Heating oils and diesels may in fact, show no appreciable change as a result of seeing early interruption last week.

Here's what's bugging me this time around though...

For a while now, I've been hearing refineries speak about shutting down for some needed winter maintenance ahead of the demand season for refining gasolines. They've been shut down for a while now, almost six weeks since I heard the first of them switch-over from distillate refining to gasolines.

That's an awfully long time considering some of the early turn-arounds I used to hear about some years back but, this time is more unusual than most.

While it's true they need some time to do their maintenance thing, should it be true that they should do it in the time that used to be set aside for the building of gasoline inventories? Because there is a drain on gasoline inventories at a time they used to build, consumers will have to pay higher pricing this coming summer as a result.

All the companies had to do was switch the time they did the maintenance thing, and we'll get to pay for it!

It's at that time of year as well, when they start on gasolines, that they build distillate inventories. Let's see what they do with those this summer and fall.

Regards for now,

George

Possible interruption to heating,diesel and stove oil pricing

From the look of things and the markets this last week or so, it looks like Newfoundland and Labrador consumers will probably be looking at possible interruptions to all distillate-type fuels.

As of the last six business days since the last adjustment, I have numbers that show that stove oils will take a 4.32 cent per litre hike. Like I said, that's over six days.

The Public Utilities Board needs a seven day fix to determine pricing adjustments.

As of today, we'd still have to see a substantial drop in distillate trading on the markets. Breaking news from the Middle East shows that Britain is looking at getting a negotiated settlement with Iran and that's starting to show on the distillate markets. Question here is: Is the trading day drop going to be enough to thwart any need for upwards adjustment?

In order for a "no adjustment scenario" on stove oils, we'd have to see the price come down by something in the order of 1.4 cents on a litre. As of 2:45pm Newfoundland time, that number was 1.2 cents a litre-perilously close to my margin for error!

Diesel, heating oils and stove oils are all part of the distillate group of fuels so, just because I only have the numbers for stove oils, it doesn't mean that we won't see adjustments to the other fuels like diesel and heating oils.

I'd be more inclined to fill the tank rather than let this one slide. Numbers are up enough that, if we don't see them increase tonight, they will possibly go up next Thursday anyways.

Regards!