|How the Maximum Prices Are Set And Other Questions|
The New Brunswick Energy and Utilities Board sets maximum prices for petroleum products sold in New Brunswick as per the Petroleum Products Pricing Act and its attendant regulation, NB Regulation 2006-41.
What products have maximum prices established under the Act?
The Board sets maximum prices for the following products:
- Motor Fuels
- Regular gasoline - self-serve and full-serve
- Mid-grade gasoline - self-serve and full-serve
- Premium gasoline - self-serve and full-serve
- Ultra-Low Sulphur diesel fuel - self-serve and full serve
- Heating Fuels
- Furnace oil
How are the maximum prices established?
STEP 1: Calculating the Benchmark Price: Benchmark prices are based on the average prices in the international markets where the product is sold in significant volumes. For motor fuels and furnace oil the benchmark is based on the average New York Harbour Price. In the case of propane, the Sarnia, Ontario market price is used. The Board calculates weekly benchmark prices based on the average of the daily product prices for each week beginning Wednesday and concluding the following Tuesday.
STEP 2: Setting the wholesale price: The wholesale margin is added to the benchmark price. The maximum wholesale margin is 6.51¢ per litre for each type of motor fuel, 5.5¢ per litre for home heating oil and 25¢ per litre for propane.
STEP 3: Taxes are added: After the wholesale margin is added, the appropriate taxes are applied. In the case of motor fuels, Federal Excise Tax, Provincial Motor Fuels tax and HST are all applied. For heating fuels only the HST is added. This results in the Maximum Wholesale Price.
STEP 4: Setting the Retail Price: The retailer is allowed to add 6.4 cents per litre to the wholesale price. In the case of full-service gasoline, the retailer may also charge an additional 3.0 cents per litre. The HST is then applied to the retail mark-up to get the Maximum Retail Price.
The process is the same for heating fuels except that the maximum retail mark-up is higher. For home heating oil the maximum mark-up is 18.2 cents per litre; for propane it is 25.0 cents per litre.
STEP 5: Adding the Delivery Charge: The wholesaler may add a delivery charge to cover the cost of delivering petroleum to various parts of the province. This delivery charge is up to 2.5 cents per litre for motor fuels except in Grand Manan, where the delivery charge is 5 cents. The maximum delivery charge for home heating oil is 5 cents and for propane it is 10 cents.
The following table is a summary of the steps to follow when calculating the maximum price of motor fuels:
Step 1 Benchmark Price
Step 2 + Wholesale Margin
Step 3 + Federal Excise Tax
+ Provincial Motor Fuel Tax
= Maximum Wholesale Price
Step 4 + Retail Margin
+ Full Service Charge
= Maximum Retail Price
Step 5 + Delivery Charge
= Maximum Total Price
Do wholesalers and/or retailers have to charge the maximum prices?
No. Companies are free to charge less for any product. Their actual delivery costs may be lower than the maximum amount permitted. In addition, a wholesaler or retailer may simply decide to sell at lower prices. It is expected that competition will result in retail prices often being less than the maximum.
The actual retail prices for the products may vary up or down. This is acceptable market behaviour as long as the retail price does not exceed the maximum price allowed for that type of petroleum product. If a retailer exceeds the maximum total price allowed, this situation should be reported to the Board.
How often will the maximum prices be set?
Normally, maximum prices will be set every week. The new price will take effect on Thursday mornings at 12:01 a.m.
Can the maximum price change before Thursday?
Yes. Maximum prices may be changed on a different day if there is a significant increase or decrease in the daily product price. Specifically, if the average market price for motor fuel changes by 6 or more cents per litre in one day, the maximum wholesale and retail prices will be changed at 12:01 AM two days after the change in the market price. For furnace oil the required change in the average market price is 5 or more cents per litre in one day.
What types of sales are covered by the Act?
Those sales between a wholesaler and a retailer and between a retailer and a consumer are covered by the Act.
How do renewable fuels affect the maximum prices set by the Board?
Federal legislation mandates petroleum producers and importers to ensure a renewable content for all motor fuels sold in Canada. There is no requirement for any renewable fuel content in heating fuels.
Beginning on March 24, 2011 New Brunswick maximum gasoline prices were set to reflect the impact of ethanol-blended gasoline (known as E10 gasoline) being introduced into the New Brunswick marketplace.
As E10 gasoline may not be available at all petroleum retail sites throughout New Brunswick at all times, the benchmark price for regular gasoline reflects either the weekly average price of regular gasoline, or E10 gasoline, whichever is higher.
The benchmark price for mid-grade gasoline is set using the higher of either the weekly average price of regular gasoline or E10 gasoline, plus three cents per litre.
The benchmark price for premium gasoline reflects the weekly average price of regular gasoline, plus six cents per litre.
Beginning on November 14, 2013 New Brunswick maximum prices for diesel fuel were set to reflect the impact of biodiesel being blended with ultra-low sulphur diesel fuel. The federal biodiesel content is 2% and the resulting product is known as B2 diesel. Unlike gasoline, the Board sets maximum price for all diesel fuel sold in New Brunswick to reflect the 2% biodiesel content.
What if I think I have been overcharged?
The Board is concerned about the possibility of a retailer charging more for petroleum products than the maximum prices set by the Board.
As there are a large number of retailers and they operate throughout the province, the Board considers that the most effective way to ensure compliance with the Act is to rely on the public to report possible incidences of overcharging.
If any member of the public believes a retailer has overcharged them they should report this to the Board. The Board requests that complaints to the Board include a copy of a receipt that shows clearly the following information:
- The date of the sale
- The type of fuel that was purchased
- The price per litre that was charged
- The name and location of the retailer
You will also need to provide your name, address and telephone number.
The Board will investigate all documented reports of possible overcharging.