Here’s what’s behind the frequent – and frustrating – changes in petrol prices in the Netherlands

In addition to the 13 regular adjustments, the Public Utilities Board has made 14 extraordinary price adjustments since February. (Axel Tardieu/CBC/Radio-Canada)

Gasoline prices in Newfoundland and Labrador are exorbitant, and frequent and sudden changes in these prices have aggravated frustrations and added confusion.

The Public Utilities Commission, which has been responsible for regulating fuel prices in Newfoundland and Labrador since 2001, normally makes adjustments once a week. But the PUB can also make extraordinary adjustments in response to drastic changes in the fuel market, and recently it has often done so.

The PUB has changed fuel prices 26 times in the last three months, including 14 extraordinary changes in addition to the 13 scheduled adjustments.

In a statement, PUB’s director of business services, Cheryl Blundon, said that until recently, extraordinary changes were rare – the latest came after the World Health Organization declared the coronavirus pandemic. COVID-19 in March 2020.

“Since the start of 2022, there have been many extraordinary adjustments outside of the weekly scheduled adjustments due to significant price volatility in the global commodity market,” Blundon said.

As frustrations mount, some gas pricing experts, like Canadians for Affordable Energy president Dan McTeague, argue that the unpredictability of gas prices in this province shows that regulation has become an effort futile.

“The best approach would be to just completely ditch the regulated system and have the predictability like you have in every other part of the country,” McTeague argued. “It’s power given back to individuals.”

Dan McTeague, pictured in a file photo, is the president of Canadians for Affordable Energy. He believes it is time to stop regulating fuel in Newfoundland and Labrador. (Simon Dingley/CBC)

According to McTeague, regulation made more sense before the internet was widely used because it offered a form of stability, predictability and transparency. Now that market information is readily available, it has become much easier to predict gas prices in unregulated markets, he said.

“Gas stations tend to reflect those prices up and down 48 hours later, and that’s where the predictability comes in,” he said.

The federal government does not regulate gasoline prices, but the provinces can. The other three Atlantic provinces and Quebec also set limits on how much retailers can charge.

Extraordinary times, extraordinary prices

Several factors contribute to high gas prices in Newfoundland and Labrador — most of them beyond the control of the provincial government or the PUB.

The price of crude oil is one of the main drivers of rising prices at the pump. Sanctions on Russian crude oil have put a strain on global supply. Gasoline demand is increasing – a normal trend during the summer, but one that has been exacerbated as COVID-19 restrictions ease in many regions. A weaker Canadian dollar also means it is more expensive to buy fuel.

All of these factors also contribute to market volatility, said Larry Short, CPA at Short Financial.

“As we get indications of whether the economy is growing or slowing, as we get indications that there may be potential changes as a result of the Ukrainian war, and particularly with regard to Europeans , whether they will indeed impose a complete blockade or a ban on the import of Russian oil, which affects the price of oil on world markets,” he said.

However, the PUB does not publicly announce when it is making an extraordinary adjustment until midnight on the day of the change. The PUB also does not do media interviews.

Blundon said the decision to make the extraordinary adjustment is based on the daily benchmark fuel price he receives from Platts US Marketscan. According to Blundon, the PUB considers an extraordinary adjustment to be warranted if the average daily or weekly benchmark changes by approximately six to eight cents per litre. Data trends and timing of adjustment also play a role.

“These adjustments arise when it is necessary to change maximum prices to allow wholesalers/retailers to recover supply costs or to ensure that consumers do not pay more than necessary to recover these costs”, Blundon said.

Rod Hill is a professor of economics at the University of New Brunswick. Hill argues that regulation still has some value because it provides stability and prevents collusion. (Julia Wright / Radio Canada)

While an unregulated market can allow for better predictability when fuel markets are volatile, an economics professor at the University of New Brunswick argues that regulation always allows for better long-term predictability and prevents collusion.

“One of the benefits of regulation – if done transparently, which is important – is that it allows buyers of these fuels to understand where these prices are coming from,” Rod Hill said. “Another benefit that regulation offers is…it could keep that price lower than it otherwise would be if that particular market wasn’t very competitive.”

Without regulation, Hill said, a lack of competition could mean higher prices in smaller communities where there are few gasoline retailers.

Blundon said the PUB does not monitor the price of fuel in unregulated jurisdictions, and said the decision to regulate fuel rests with the government, not the PUB.

A need for transparency

Although they disagree on regulating gas prices, Hill and McTeague agree that prices should be transparent and that the PUB should be clear in its methodology.

“The regulator really needs to clarify what the wholesale margins are, what the retail margins are, whether an allowance should be made for transportation costs,” Hill said. “This should be done in a clear and transparent manner.”

Newfoundland and Labrador Digital Government and Services Minister Sarah Stoodley, seen here in a file photo, has introduced legislation to make the pricing process for digital more transparent gasoline by the PUB. (Still from Newfoundland and Labrador House of Assembly video)

The PUB provides a limited breakdown of how it calculates prices on its website, but does not provide details on what goes into markups or the decision-making process for making extraordinary price adjustments.

Although it answers written questions, PUB does not grant interviews to the media.

The provincial government says it aims to make the PUB more transparent with changes to the Petroleum Products Act. The changes will require the PUB to provide a breakdown of the retail and wholesale markup for gasoline prices. The Minister for Digital Government and Service NL, Sarah Stoodley, will also be able to order the PUB to hold public hearings.

“The day-to-day execution of these rules is overseen and enforced by the Public Utilities Commission, and that’s what we’re trying to demystify with our proposed changes,” Stoodley said at a press conference earlier in may.

According to Short, there is currently not much evidence for or against regulation in this province. He said a government review might be warranted.

“But I doubt it would make that much of a difference,” he said.

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