Feature Article: Understanding the Regulation of Gasoline Prices in Atlantic Canada
Release date: 2017-05-30
Canadian retail gasoline prices are determined based on several factors, including supply and demand dynamics, taxes, and crude oil prices. Another consideration is whether prices are regulated. Although gasoline prices are not federally regulated in Canada, provincial governments have authority to do so at their discretion. All four Atlantic Provinces, which account for approximately 7.5% of Canadian gasoline consumption, regulate gasoline prices by a utility board or commission.
Each of these bodies regulates prices differently and sets and modifies prices in accordance with relevant market dynamics and provincial policies. While Prince Edward Island (PE) gasoline prices have been regulated since 1988, the other Atlantic Provinces began regulating gasoline in the early to mid-2000’s.
|Gasoline Price Regulation||Prince Edward Island
|Newfoundland and Labrador
|Who||Regulatory & Appeals Commission||New Brunswick Energy and Utilities Board||Nova Scotia Utility and Review Board||Newfoundland and Labrador Board of Commissioners of Public Utilities|
|When||1st and 15th of each month||Weekly on Thursdays||Weekly on Thursdays||Weekly on Thursdays|
|What||Min and max price||Only max price||Min and max price||Only max price|
|Number of Zones||One: Province-wide||One: Province-wide||Six zones||14 Zones (+ 12 sub-zones)|
Description: This table displays characteristics of gasoline price regulation in each of the four Atlantic Provinces. PE and NS set a minimum and maximum price, while NL and NB set only a maximum price. In PE, the gasoline price changes on the 1st and 15th of the month, while the other three provinces change their prices weekly on Thursdays. PE and NB prices apply to the entire province, whereas NS and NL have multiple zones in which the price of gasoline differs.
Each regulatory body uses the regional New York Harbor gasoline price as its benchmark, since it is close in proximity and a highly liquid market with many buyers and sellers. Other factors that are considered include spot market prices, transportation allowances between zones within provinces, wholesale and retail margins, and applicable taxes.
More generally, Atlantic Canadian gasoline prices are affected by international crude oil prices and market dynamics. The vast majority of crude oil used to produce gasoline for Atlantic Canada is imported by tanker from overseas and refined in Saint John, NB and Come-by-Chance, NL. These refineries also serve export markets, which means that Atlantic gasoline prices are also influenced by regional gasoline inventories in the United States (U.S.) and the wholesale price in the U.S. cities closest to the Atlantic Provinces.
Average Monthly Regular Retail Gasoline Prices in Atlantic Province Capital Cities
Source and Description
Source: Kent Group Ltd.
Description: The above line graph shows monthly regular retail gasoline prices for the capital cities of the four Atlantic Provinces, as well as the Canadian average gasoline price from January 2011 to April 2017. All of the Atlantic prices tend to track together and averaged $1.27/litre from 2011 to 2013. With a drop in crude oil prices starting in 2014, Atlantic gasoline prices fell to 93 cents/litre by January 2015. Gasoline prices rebounded slightly to $1.21/litre in July 2015 before decreasing to 89 cents/litre in February 2016. Prices then steadily increased to $1.17 as of April 2017. The only major anomaly to these trends was in St. John’s, NL, where a June 2016 increase in the provincial sales tax significantly increased gasoline prices there. Since that time, NL gasoline prices have averaged 22 cents above the national average.
The only major anomaly in Atlantic gasoline prices is the recent St. John’s price. In June 2016, gasoline prices increased significantly in response to the NL government doubling its provincial sales tax. Prices in St. John’s have averaged 22 cents above the national average since that time, and have been roughly 25% higher than in the other three Atlantic Provinces.
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