Frequently Asked Questions

What does regulation of gasoline and diesel fuel in Nova Scotia mean to me?

Regulation will mean different things to different sectors of the industry and for the general public.

For the general motoring public it will mean more stable gasoline and diesel fuel prices where, except for extraordinary circumstances the price you pay when you go to work in the morning will be, give or take a penny, the same price you can fill up for when you drive home later that evening.

In fact it won't be unusual for the cost of gasoline and diesel fuel available to the general motoring public to remain unchanged for up to a week at a time. In the event of disasters like Hurricane Katrina the price may change more rapidly but other than that the days of two or three price changes in a day are over.

If you are a gasoline Retailer it will also mean that when international crude prices or other factors drive the cost of gasoline up you will still be able to make a fair profit instead of being caught in the squeeze between consumers and gasoline suppliers.

In turn this means that for Nova Scotians in the rural areas of the province, where it's a 10 or 15 minute drive to buy gasoline, the chances that your local gas station will continue to operate are a little better now. And that means if you are a senior, or traveling in the winter weather you will still be able to get what amounts to an essential service in your own community.

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Which petroleum products are regulated in Nova Scotia?

In Nova Scotia the cost of all grades (regular, mid-grade, or supreme) of gasoline will be regulated along with ultra low sulphur diesel fuels. Once you allow for the cost of transportation all Nova Scotians will pay the same price (within a penny and a half) for regular self-serve gasoline and diesel no matter where they live.

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Where does the Regulator get the authority to set the price of gasoline and diesel fuels?

The regulator's authority for price regulation is contained in the Petroleum Products Pricing Act (Bill 79) which was passed during the Spring Session of the legislature in 2005.

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Who will actually set the prices?

The Nova Scotia Utility and Review Board will act as the Regulator with the authority to set gasoline and diesel fuel pricing beginning October 1, 2009.

The UARB is a quasi-judicial arms-length body that currently regulates several public utilities and business operations in Nova Scotia. The Board has indicated it will hold a public hearing in relation to gasoline and diesel pricing in Nova Scotia after assuming its new mandate as the Regulator.

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What factors influence the world price of oil and gasoline?

The cost of energy is a large component in manufacturing along with the cost of labour and raw materials. When you also consider emerging industrial nations such as China there is tremendous demand for gasoline and crude oil.

In fact both of these commodities are traded on global markets virtually 24 hours a day and often reflect geo-political events that occur well outside our national boarders. At the same time the actual cost of crude oil is just one factor that determines the price of gasoline.

The petroleum product reserves (crude oil, gasoline, distillates) held by the United States also affect the price of these products, as does the Organization of Petroleum Exporting Countries when they meet to set production limits.

In today's world where information travels instantly around the globe these considerations affect market prices instantly. Oil and gasoline are not only affected by market trends but the other factors described above. This leads to predicting the market future often for days or weeks ahead.

Other factors include:

• the supply and demand for oil products;
• interruption of supply as a result of geopolitical occurrences such as civil unrest or war;
• natural disasters and weather patterns;
• speculative actions on the part of money managers; and
• seasonal demands that see gasoline spike during the summer vacation season.

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Isn't Canada self-sufficient when it comes to oil and gas? Why can't we just set our own price in Nova Scotia?

Yes. Canada is a net exporter of crude oil on the world marketplace, and while most of what we export in fact goes to the United States it is sold on the global market at world-prices. Just as any other product, be it lobsters in Boston, or Christmas trees in Texas, producers naturally sell into the market willing to offer the best prices.

The reason we pay higher prices is because if we don't compete as consumers, ie: by offering lower than fair market value, suppliers will simply sell to another customer. That in turn could result in supply shortages for gasoline and oil here in Nova Scotia.

There are no laws that can force any business to sell into the Nova Scotia marketplace and it is unlikely that any such law, if it existed, would be enforceable. No firm would sell into a market where sustained losses are likely. In short, industry withdrawal from the marketplace would occur.

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What is the government doing to protect consumers from high gasoline prices?

Consumer demand plays as large a role in high market prices as most other factors. While it is popular to blame the industry for high prices, international markets decide the market price.

The laws of supply and demand are at work and international markets react to such demand. Each summer when the warm weather sends more people on vacation or to the beach there is increased demand for gasoline, and that demand means prices go up.

Like most other products you purchase, whether it's bottled water, or a vacation package to Florida in the winter, or perhaps a new pair of shoes, the market will price to the level at which consumers pay. In the end consumers as a society have the ability to control their demand in a variety of ways, smaller cars burn less gas, planning to get as many errands done in one trip as possible, using the air conditioning only when you have to, sharing a ride or taking a bus - these are always to reduce demand and at the same time reduce your costs.

Reduced consumer demand when sustained, will be recognized by the market and prices will come down. Just as importantly they help promote your personal health and protect our environment from pollutants that increase greenhouse gases and global warming.

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Why aren't consumers being given notice when the price is going up?

The purpose of regulation is to provide consumer confidence in that fact they are being treated fairly, and that prices, while they may be up or down they are justifiable. Part of that responsibility for consumer protection also relates to ensuring there is supply available for the general motoring public.

Experience in other jurisdictions has indicated that even a price increase of three or four cents will result in long line-ups that can cause traffic snarls. In some cases where there are smaller rural station the chance of an actual run-out of gas is possible - leaving emergency vehicles and the general motoring public without service.

While anyone can follow oil and gas markets that trade in the daily paper and make an educated guess where prices may go, the Regulator in order to be fair to everyone involved has to make it's changes "opportunity neutral" or designed to minimize the potential for any party to take unfair advantage of a dramatic or significant change in price.

Any advance notice could enable consumers to take advantage of retailers or, conversely, afford wholesalers and retailers the opportunity to take advantage of consumers.

More specifically, if consumers had several days advance notice of a gasoline or diesel price increase, many consumers would, where possible, plan their purchases around the price change. This would result in busier-than-normal periods for retailers just prior to a price change and quieter-than-normal periods following a change.

In meeting the demands of their customers, retailers and wholesalers would incur additional operating costs to accommodate the shift in business activity. In addition, retailers would attempt to stock up on inventory at the lower price to be sold at a later date at a higher price. Conversely, in the case of a price decrease, consumers would delay purchases forcing retailers to take losses on previously purchased inventory. Minimal advance notice to the wholesaler, retailer and the consumer serves to minimize this potential.

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