Frequently Asked Questions

The petroleum product pricing methodology has been utilized and approved by both current and past petroleum pricing panels.

Components of pricing:

• Regular Gasoline:
  • Charlottetown rack price in cents per litre (cpl)
  • + wholesale margin 5.0 cpl
  • + federal excise tax 10.0 cpl
  • + provincial gas tax 8.47 cpl
  • + federal fuel charge 17.61 cpl
  • + retail margin 7.0-8.0 cpl self-serve & 7.0-10.5 cpl full-serve
  • + HST 15%
  • = retail pump price in cpl.
• Premium Gasoline:
  • Charlottetown rack price in cents per litre (cpl)
  • + wholesale margin 5.0 cpl
  • + federal excise tax 10.0 cpl
  • + provincial gas tax 8.47 cpl
  • + federal fuel charge 17.61 cpl
  • + retail margin 7.0-8.0 cpl self-serve & 7.0-10.5 cpl full-serve
  • + HST 15%
  • = retail pump price in cpl.
• Furnace Oil:
  • Charlottetown rack price in cpl
  • + combined wholesale/retail margin 23.1 cpl
  • + GST 5.0%
  • = maximum retail price in cpl.
• Diesel: 
  • Charlottetown rack price in cpl
  • + wholesale margin 5.0 cpl
  • + federal excise tax 4.0 cpl
  • + provincial gas tax 14.15 cpl
  • + federal fuel charge 21.39 cpl
  • + retail margin 7.0-8.0 cpl self-serve & 7.0-10.5 cpl full-serve
  • + HST 15%
  • = retail pump price in cpl.

The Commission follows a set methodology for petroleum pricing. Changes in the price of petroleum products are tracked daily in the Commission’s pricing database and petroleum pricing model for both the commodity price on the New York Mercantile Exchange (the base price used by the oil industry for all petroleum products sold in the Atlantic Provinces) and the Charlottetown rack price (delivery price of refined product to Charlottetown Harbour set by oil companies). The daily price for each petroleum product is calculated, an average price is calculated over the prior one-week period, and a year-to-date weighted average price is calculated using actual volumes of petroleum product sold. Conversions are made for $USA to $CDN and gallons to litres.

At its weekly price setting meetings, the Petroleum Panel reviews three prices:
• the daily price for each petroleum product;
• the average price for each petroleum product over the prior one-week period; and
• the year-to-date weighted average price for each petroleum product calculated using actual volumes sold.

These numbers determine the weekly price adjustments for gasoline, diesel, and furnace oil.

In setting the final price of all three petroleum products, the Petroleum Panel primarily uses the average price for the prior one-week period. The Panel adjusts this weekly average price up or down by a forward averaging amount to ensure that the year-to-date weighted average wholesale and retail margins are achieved. The forward averaging adjustment is also used, although infrequently, to adjust the weekly price if other factors, such as supply and demand, are impacting the market price so much that an adjustment to the calculated weekly average price is required.

The Commission may, in its sole discretion, amend the methodology from time to time.

Price Review and Consideration of Unscheduled Price Adjustments

The Commission policy for an unscheduled interruption of petroleum pricing is based on the current practice of daily review by staff of petroleum prices for gasoline, furnace oil and diesel. Staff advise the Chair of any changes in the price of any of the regulated products that could have a material effect on petroleum prices. The Chair then determines if a meeting of the Petroleum Panel is warranted to consider an unscheduled price interruption. If a meeting is held, the Petroleum Panel considers the pricing in accordance with the methodology and the process followed for a weekly price setting.

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.

The Commission regulates the price of gasoline, diesel, furnace oil, and propane sold in Prince Edward Island. A minimum and maximum price is set for gasoline and diesel products and maximum prices are set for furnace oil and propane. View current petroleum prices. 

Authority for price regulation is found in the Petroleum Products Act. Under this legislation, the Commission’s role is to “ensure at all times a just and reasonable price for heating fuel and motor fuel to consumers and licensees within the province.” This means that the Commission must ensure that Prince Edward Island consumers pay a fair price for petroleum products while wholesale suppliers make a reasonable rate of return. See Section 2 of the Petroleum Products Act.

The other Atlantic provinces also regulate petroleum prices.

Price adjustments for gasoline, diesel, and furnace oil are effective at 12:01 a.m. every Friday. Price adjustments for propane are effective at 12:01 a.m. every second Friday.

The Commission policy for an unscheduled interruption of petroleum pricing is based on the current practice of daily review by staff of petroleum prices for gasoline, furnace oil, and diesel. Staff advise the Chair of any changes in the price of any of the regulated products that could have a material effect on petroleum prices. The Chair then determines if a meeting of the Petroleum Panel is warranted to consider an unscheduled price interruption. If a meeting is held, the Petroleum Panel considers the pricing in accordance with the methodology and the process followed for a weekly price setting.

There is an indirect relationship between crude oil prices and the price of gasoline at the pumps. Pump prices set by the Commission are based on the price of gasoline traded on the New York Mercantile Exchange (NYMEX) which is the base price for all gasoline sold in eastern Canada and the north eastern United States.

As crude oil and gasoline are traded separately on world markets, it often happens that the price of crude oil and gasoline move in opposite directions. Crude prices may fall due to global economic conditions while gas prices rise and fall due to regional supply and demand factors.

Another reason for the difference in price between the two products is the amount of time it takes from the purchase of crude oil to its arrival at a gas pump as a refined product. The crude oil prices we hear reported in the news are futures prices and represent 30-day purchase contracts. It then takes 60 to 75 days to convert that crude oil into gasoline.  As a result, there is often a difference in the price of crude oil and the price of gasoline at the pumps.

Bloomberg’s (bloomberg.com) energy markets show how crude oil and gasoline trade on the NYMEX. Click on each product for charts that show pricing for the past five years.

Crude oil is the base product from which most refined oil products such as gasoline, diesel, and furnace oil are produced. Crude processed in Atlantic Canada is sourced from overseas locations such as the Middle East and Nigeria, shipped to Canada in crude tankers, and refined into finished products in refineries located in Saint John, New Brunswick, and Come By Chance, Newfoundland. Refined products produced at these refineries are then shipped throughout Atlantic Canada, the U.S. and Europe.

Refined products such as gasoline, diesel, and furnace oil are made from the processing of crude oil. Crude oil is sourced from all over the world, including the Middle East, Nigeria, as well as the United States and Canada.

Crude oil and its refined products are bought and sold on commodity exchanges around the world, such as the New York Mercantile Exchange, with the price of these products changing every day and, in some cases, several times a day.

A variety of factors can influence world prices of crude oil and its refined products including:

• supply and demand;
• interruption of supply as a result of civil unrest or war;
• natural disasters and extreme weather;
• seasonal demands; and
• speculative actions by money managers.

Refined product prices are impacted primarily by supply and demand. Gasoline and diesel prices are usually higher in the spring and summer when demand is highest. Alternatively, furnace oil prices are higher in the fall and winter when demand is highest. Production interruptions resulting from extreme weather or unscheduled refinery or pipeline shut downs can also impact supply and affect market prices.

As crude is priced in terms of the U.S. dollar, a lower Canadian dollar can make crude more expensive for Canadian refineries to purchase and, in turn, can make refined products such as gasoline, diesel, and furnace oil more expensive to produce. A rising Canadian dollar alternatively reduces the cost of production which ultimately results in lower petroleum products prices.

The relationship is a critical component in setting local prices, as a lower Canadian dollar limits our ability to benefit from lower U.S. crude prices.

The reference price for refinery rack or wholesale prices in the region is the New York Mercantile Exchange (NYMEX) price. The base price for all gas sold in Atlantic Canada is set by the price of gas traded on the NYMEX. Product is bought in all of Atlantic Canada on the basis of refinery rack prices. Rack prices are normally priced slightly above the NYMEX price. The Commission uses the Charlottetown rack price (delivery price of refined product set by oil companies) when setting petroleum prices.

Reducing consumption of both motor fuel and home heating fuel is the best way to lower petroleum bills. The websites below contain helpful information on managing home heating costs and reducing motor fuel consumption:

efficiencyPEI
https://www.princeedwardisland.ca/en/topic/energy-efficiency)

Natural Resources Canada, Office of Energy Efficiency
https://www.nrcan.gc.ca/energy-efficiency/10832