Petroleum Prices - Questions and Answers

How are the maximum prices established?

STEP 1: Calculating the Benchmark Price: Benchmark prices for refined petroleum products are based on the average prices on international markets where the product is sold in significant volumes. For motor fuels and furnace oil, the benchmark price is based on the average New York Harbour Price. The benchmark prices for mid-grade and premium gasoline include mark-ups established by Regulation. In the case of propane, the Sarnia, Ontario market price is used.

The Board calculates weekly benchmark prices based on the average of its daily reference prices for the seven-day period, excluding the weekend, since the benchmark price of that petroleum product was last published.

STEP 2: The Wholesale Margin is added: The maximum wholesale margin is added to the benchmark price. The maximum wholesale margin is 6.51 cents per litre for each type of motor fuel, 5.5 cents per litre for furnace oil and 25.0 cents per litre for propane.

STEP 3: The Cost of Carbon Adjustor is added: The cost of carbon adjustor for motor fuels is added to the other prices. The cost of carbon adjustor is a monetary adjustment intended to mitigate the added costs for petroleum wholesalers and retailers to comply with federal carbon intensity standards imposed by the Clean Fuel Regulations under the Canadian Environmental Protection Act.

The cost of carbon adjustor only applies to motor fuels.

STEP 4: Taxes are added: Once the benchmark price, the maximum wholesale margin, and the cost of carbon adjustments are added together, all applicable taxes and fuel charges are applied. In the case of motor fuels, this includes the federal excise tax, the provincial gasoline and motive fuel tax, the federal fuel charge, and the harmonized sales tax (HST). For heating fuels, only the federal fuel charge and HST is added. This results in the maximum wholesale price.

STEP 5: Setting the Maximum Retail Price: The retail margin is added to the maximum wholesale price. The maximum retail margin is 8.46 cents per litre for each type of motor fuel. In the case of full-service motor fuels, the retailer may also charge up to an additional 3.0 cents per litre. The HST is then applied to the retail mark-up to produce the maximum retail price.

The process is the same for furnace oil and propane except that the maximum retail margins are higher. For furnace oil, the maximum retail margin is 27.21 cents per litre; for propane, the maximum retail margin is 25.0 cents per litre.

STEP 6: Adding the Delivery Cost: Wholesalers are allowed to recover the actual cost of delivering petroleum products to various parts of the province, up to a maximum of 3.75 cents per litre for motor fuels.

On Grand Manan Island, the maximum delivery cost is 5.0 cents per litre. Retailers are allowed to pass these delivery costs on to consumers.

The maximum delivery cost for furnace oil is 5.0 cents per litre, and for propane, it is 10.0 cents per litre.

The HST is then applied to the maximum delivery cost for each fuel type.

STEP 7: Market Adjustor: The market adjustor has been set at 0.00 cents per litre as of December 20, 2022.  It will be reset following a process that will be established by the Board.

What are the cost of carbon calculations?

STEP 1: Determine the clean fuels regulation credit price

STEP 2: Convert the credit price per litre calculated in Step 1 to a credit price per tonne

STEP 3: Apply the CFR adjustor from Step 2 by fuel type (ULSD & gasoline)

Notes:

1. California Air Resources Board: Weekly LCFS Credit Transfer Activity Report, Average Price (All Non Zero Transfers) (weekly
2. California Low Carbon Fuel Standard Regulation: Table 2. LCFS Carbon Intensity Benchmarks for 2011 to 2030 for Diesel Fuel and Fuels Used as a Substitute for Diesel Fuel (current year)
3. California Air Resources Board: LCFS Pathway Certified Carbon Intensities, Soybean and Soybean Oil Feedstock for Renewable Diesel (RND) (weekly)
4. Argus Air Daily: Methodology and Specifications Guide, Energy density of renewable diesel (129.65 MJ/gal / 3.7854 = 34.25 MJ/litre) (fixed)
5. Convert tonnes to gCO2e/MJ - divide by 1 million
6. Weekly USD/$CDN exchange rate (Bank of Canada), corresponding to weekly LCFS Credit Transfer Price (weekly)
7. Weekly average biomass-based diesel (D4) RIN price (current year), Source: Argus Americas Biofuels, corresponding to weekly LCFS Credit Transfer Price (weekly)
8. US Code of Federal Regulations, Equivalence values for renewable fuel, §80.1415(b)(4) (fixed)
9. Clean Fuel Regulations, Schedule 1, Reference Carbon Intensity, Liquid class (current year)
10. Clean Fuel Regulations, Section 170(1), liquid class default carbon intensity (fixed)
11. Clean Fuel Regulations, Schedule 2, Energy Density of Fuels (Item 10 – Hydrogenation-derived renewable diesel) (fixed)
12. Convert gCO2e/MJ to tonnes - multiply by 1 million
13. Clean Fuel Regulations, Section 5(3), Baseline Carbon-Intensity (fixed)
14. Clean Fuel Regulations, Section 5(1), Fuel Carbon-Intensity Limits (current year)
15. Clean Fuel Regulations, Schedule 2, Energy Density of Fuels (Item 9 – Gasoline and Item 13 - Diesel) (fixed)