PETROLEUM PRODUCT PRICING METHODOLOGY
The petroleum product pricing methodology (the
"Methodology") has been utilized and approved by both current and prior
petroleum pricing panel(s).
The Methodology is as follows:
Charlottetown rack price in cents per litre ("cpl")
- + wholesale
margin (presently 5.0 cpl)
- + federal
excise tax 10.0 cpl
- + provincial
gas tax 9.68 cpl
- + retail
margin (presently 5.5 - 6.5 cpl self-serve and 7.5 - 10.5 cpl
- + HST (15%)
- = retail
pump price in cpl.
Charlottetown rack price in cpl
- + combined
wholesale/retail margin 21.0 cpl
- + GST (5.0%)
- = maximum
retail price in cpl.
rack price in cpl
wholesale margin (presently 5.0 cpl)
federal excise tax 4.0 cpl
provincial gas tax 15.83 cpl
retail margin (presently 5.5 - 6.5 cpl self-serve and 7.5 - 10.5
retail pump price in cpl.
The Charlottetown rack price in cpl is entered in the
Commission petroleum pricing database and the petroleum computer model
is updated daily. The Commission monitors daily changes in both
Charlottetown wholesale rack and New York Harbour price listed in $USA
and converted by staff to $CDN and entered in the Commission database
and model daily. First, the daily price for each petroleum product is
calculated. Second, an average price is calculated over the prior
two-week period. Third, a year-to-date weighted average price is
calculated using actual volumes of petroleum product sold.
The Petroleum Panel meets bi-weekly to determine any
changes that should be made to the price of gasoline, furnace oil and
diesel fuel and determines the changes in the price of petroleum
required to meet the two-week average price and the year to date
weighted average price for each product. In setting the final price of
all three petroleum products the Petroleum Panel uses these calculated
numbers and, if appropriate, adjusts the price up or down if other
qualitative factors - such as pressure on the New York Price from
inventory levels or supply chain interruptions - dictate that there
should be an adjustment to the calculated price. However, at most price
settings the price is set only by the reference to the calculated
average numbers provided by the database model.
To summarize, when pricing, the Petroleum Panel
first reviews all the quantitative numbers in the Methodology (daily
price, two-week average price and year-to-date average price based on
actual volumes of petroleum sold). These numbers dictate the change to
be made in the petroleum prices. The Petroleum Panel will then review
any relevant qualitative factors (daily and weekly USA domestic
inventory reports, Kent Marketing Report, MarketWatch and Bloomberg
NYMEX prices, and commentary on petroleum prices, demand and supply, and
other commentary - OPEC, Global issues, refinery shut-downs, and severe
weather events affecting off-shore drilling, etc.) that could affect
prices. If the Commission is of the opinion that these qualitative
factors are affecting prices, then the Commission may adjust the price
dictated by the quantitative numbers.
The Commission may, in its sole discretion, amend the
Methodology from time to time.
Price Review and Consideration of Unscheduled Price
The Commission policy for unscheduled interruption of
petroleum pricing shall be based on the current practice of daily review
by staff of petroleum prices for gasoline, furnace oil and diesel fuel.
Staff will advise the Chair or Vice-Chair of any changes in the price of
any of the regulated products that staff determine could have a material
effect on petroleum prices. The Chair or Vice-Chair will then determine
if a meeting of the Petroleum Panel to consider an unscheduled price
interruption is to be held. If a meeting is held, then the Petroleum
Panel shall consider the pricing in accordance with the Methodology and
the process followed for a bi-weekly price setting.