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Question: 17 Maximum fuel prices in this province are calculated based on the individual market price data of each of the regulated petroleum products: gasoline and diesel motor fuels, furnace oil, stove oil, and propane heating fuel. The Board does not use the price of crude oil in any of its pricing calculations. Crude oil is the unrefined base product from which gasoline is derived and is traded on the commodities market as a stand-alone commodity. Global crude oil prices can be affected by a number of factors such as geopolitical instability, military actions in supplying countries, and global economic conditions. Gasoline is refined from crude oil and also trades as a stand-alone commodity on world markets independent of crude oil. As gasoline is derived from crude oil we expect the price of gasoline to also be affected by the world price of crude oil. Other factors that may influence the price of gasoline as a traded commodity on world markets include refining capacity, refining and marketing costs, inventory levels, transportation and distribution costs, and supply and demand for the commodity. There may be a glut of crude available on world markets but a capacity problem in refining (for example, when refineries are shut down for repair or maintenance or in the case of damage to refining infrastructure due to a fire or hurricane) will reduce the supply and availability of refined products. This could lead to temporary spikes in market prices for refined products in the absence of changes in crude oil market prices. |
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