Still no relief on the heating front
Heavy commodity investment still forcing prices upwards

News release

Conception Bay South, NL, April 08, 2008- Market conditions are still putting upwards pressure on petroleum commodities and that means ‘prices up’ for gasoline along with stove oils this week, that’s according to George Murphy of the Consumer Group for Fair Gas Prices.

“Continued heavy investment into commodities like heating, stove oils and gasoline is putting upwards pressure on those petroleum products as a hedge against the U.S dollar. We’re also dealing with a huge drop in refiner capacity as refiners turn their attentions towards gasoline as we get out of the winter heating season. All this means that consumers here in the province of Newfoundland and Labrador will likely see increases to all petroleum pricing again this week.

What consumers can expect
“All numbers are based on twelve days data out of a possible fourteen that is used to set pricing. It appears that gasoline will see the bigger increase. Numbers there show a possible 2.8 cent a litre hike at the pumps while stove oils will only see a 3/10ths of a cent hike in price. The stove oil number may be a sign that we’re near the peak in pricing for heating oils as well as investors and refiners turn their attention to gasoline for the run-up to the summer driving season. The actual that may occur with heating and stove oils could be higher with the other days of data unavailable yet, although I don’t think those numbers will be significant to radically change things at this point.

Warning for next winter
While pricing for heating and stove oils are both expected to back off from records in short order, those same numbers have to begin to show a substantive drop between now and the fall if we are to avoid any problems with consumers keeping themselves warm next winter. Right now, heating and stove oil pricing is a record 28 cents a litre higher than last year while gasoline is roughly 7 cents a litre higher for the same timeframe. I would advise government now rather than later, to get rebate and retrofit programs ready to catch those who will need it, and that could be everybody next year if pricing does not fall back to more affordable levels between now and the fall. A rebate of $300 to consumers just will not cut it next time if pricing does not decline.

Time for pressure on the federal government
While the provincial government came through with a rebate program this year, the federal government got off scott-free in aid to consumers of heating products. Why? It is now time for both governments to get together and remove all the taxation components on all forms of heat in this country. Both levels of government are making astronomical amounts of revenue on oil royalties and that should be returned to the Canadian consumer. The pressures put on all related heating commodities is complicated that much more by a tax on a necessity in this country and so far, that pricing outlook may be a bleak one for heating, stove oils and natural gas users next winter. The simple removal of all forms of taxation on all forms of heat would go a long way to providing some relief to consumers.

Early summer gasoline outlook
Market investors and refiners have turned their attention to gasoline as the heating oil season comes to an end. Continued investment in commodities ahead of a dropping U.S dollar, may be enough to keep the pressure up on pricing but our models are still showing a “market reluctance” to drive up pricing to consumers. Recession fears are absorbing some of the upwards pressures right now and, I don’t believe that consumers are getting hit with as big of increases as they could possibly be because of that. Bad economic news has resulted in a fear in the markets that energy could be hit sooner than other commodities like foodstuffs. Bearing that thought in mind, it appears that while we may experience some increases heading into the summer, they will not be as great as the $1.50 a litre predicted by some industry analysts out there. Our model still shows a minimum to maximum possible price of $1.22 to $1.37 at the summer peak in July and, even those numbers show the volatility of the markets. Just the difference between last year and this years spot petroleum numbers shows a $1.30 a litre at the pumps is “attainable” at this point.

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For more information, contact;

George Murphy
Group researcher/Member
Consumer Group for Fair Gas Prices
gasprices@hotmail.com