Wholesale and retail margins under the Petroleum Products Act
The Commission has general supervision over the pricing of petroleum products in Prince Edward Island, and the Commission determines the wholesale and retail prices for all petroleum products (gasoline, diesel, furnace oil, etc.) ensuring that the price being charged is just and reasonable. Pricing includes a number of components. One of those components is margin. There are two types of margin for petroleum products: wholesale margin and retail margin.
Wholesale margin for a petroleum product means the fixed amount set by the Commission measured in cents per litre that is included in the price of a petroleum product for the general purpose of covering the costs of the wholesaler while also permitting a reasonable rate of return to be earned by the wholesaler. The wholesale margin is the difference between the benchmark price for that product and the price at which a wholesaler is permitted to sell that petroleum product to a retailer, excluding taxes and levies imposed by the provincial and federal governments. There is one fixed wholesale margin for each petroleum product.
Retail margin for a petroleum product means the fixed amount set by the Commission measured in cents per litre that is included in the price of a petroleum product for the general purpose of covering the costs of the retailer while also permitting a reasonable rate of return to be earned by the retailer. The retail margin is the difference between the price paid to the wholesaler for that product and the price at which a retailer sells that petroleum product to a consumer, excluding taxes and levies imposed by the provincial and federal governments. There is both a minimum and a maximum retail margin to allow for some flexibility amongst retailers. Retail margin may also differ slightly for full-service versus self-service offerings.
The current wholesale and retail margins for petroleum products can be viewed here.
The Petroleum Products Act states that no wholesaler or retailer shall sell a petroleum product at a price different from the price last approved by the Commission or with a margin that is not within the minimum and maximum margin determined by the Commission.
Relevant factors and information when determining margins
Changes to the wholesale or retail margins for a petroleum product are typically initiated by wholesalers or retailers filing an application with the Commission. The Commission may also, on its own initiative, review the wholesale or retail margin for a petroleum product to ensure that the price being charged is just and reasonable. This process is also used by other provincial utility boards in Atlantic Canada.
Public notice of a margin review is published on the website of the Commission and in local newspapers.
In determining the wholesale and retail margins, the Commission applies such criteria as it considers advisable. This direction is found in the Petroleum Products Act. Relevant factors for the Commission when determining the wholesale or retail margins may include but are not limited to:
- the costs of transporting the petroleum product to the province;
- the volume of sales;
- storage costs;
- inventory turnover rates;
- applicable charges, levies and costs, including insurance;
- common and universal prices throughout the province; and
- any other factors that the Commission considers relevant at the time of its decision.
When reviewing the wholesale or retail margins for a petroleum product, the Commission considers
relevant information from a number of sources, including but not limited to the following:
- raw data from affected parties, including actual operating costs;
- statistical information from industry resources;
- statistical information from governmental resources;
- reports from experts or consultants retained by affected parties;
- reports from independent experts or consultants retained by the Commission;
- margin reviews conducted by regulators in other relevant jurisdictions;
- raw data and statistical information maintained by staff of the Commission;
- information submitted by the public or interveners with standing; and
- any other information that the Commission considers relevant at the time of its decision.
The factors and information considered by the Commission are similar to, and consistent with, the factors
and information considered by other provincial utility boards in Atlantic Canada.
Decisions made by the Commission are publicly accessible on the website of the Commission.
The Commission may, in its sole discretion, amend its process for determining margins from time to time.