Ike crisis passes
Gasoline and heating fuels to drop tonight

Media release

Conception Bay South, NL, September 17, 2008- Consumers in Newfoundland and Labrador will experience a huge drop in gasoline and heating oil prices tonight when prices are set by the Public Utilities Board.

“Consumers in the province rode the wave that Hurricane Ike brought with it on Sunday night and they’ve done their part in conserving in the face of the crisis. Tonight, pricing for all petroleum products are showing strong downwards turns as a result of the restraint they practiced. That, along with drops in the prices for crude and their related products, leads me to believe that the interruption formula will be used to drive prices back to something more bearable in the next few hours. Numbers are showing in excess of 11.7 cents a litre down for gas and greater than 4.5 cents per litre down for heating oils,” said George Murphy, group researcher for the Consumer Group for Fair Gas Prices.

“My guess was that the PUB was going to have to step in here and return the market to some normalcy after the news on Ike. The news of economic bailouts for some major financial firms also helped motivate the numbers down because of economic fears and fears of a drop in consumer demand connected with that.

“The PUB did its best in protecting consumers during this crisis. Consumers here were protected over the weekend and didn’t face the “Ike Hike” until Monday morning. When prices come down, it would have been a three day window where prices would have been up. Prices in other markets rose in some jurisdictions as soon as the same day. Toronto, for example, increased prices by 13 cents and didn’t come down until Monday night, a full five days. Here, we experienced a three day increase that will be passed back to consumers as early as this evening.

“Retailers in the province also played their part in the Ike scenario. They protected themselves by buying early when news of Ike initially broke and there was a much talked about possibility of a run-up in gasoline pricing. They didn’t have to face high prices of purchase when they hit because they bet against that news, a process known as hedging. They learned from past experience and it paid off in spades for them.

“Consumers should also be aware that, while there is a slight correlation between crude and gasoline prices, gasoline is traded as a separate refined commodity on the New York Mercantile Exchange. Just because prices for crude are down, that doesn’t necessarily mean that related refined commodities prices are also. In this case, while crude oil traded down over the last few days by something in the area of $9 US downwards, gasoline is showing close on twelve cents a litre down.

For more information, contact;

George Murphy
Group researcher/Member
Consumer Group for Fair Gas Prices