Fuel Focus, June 5, 2009

Table of Contents

• National Overview
• Recent Developments
• Retail Gasoline Overview
• Wholesale Prices
• Refining and Marketing Margins
• Crude Oil Overview
• Supplement: The Cost of Operating a Vehicle
• Download the report

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National Overview

Retail Pump Prices at $1.00 per Litre

The average Canadian gasoline price for the week of June 2, 2009, remained unchanged at $1.00 per litre compared to the previous week when prices rose to a seven-month high.

Retail gasoline prices reflected the upward pressure from wholesale gasoline prices which, in turn, were firmed up by higher world crude oil prices. However, prices were moderated somewhat by a stronger Canadian dollar partly shielding consumers from the impact of rising world crude oil prices.

Retail pump prices in both Canada and the U.S. are also affected by the expected increase in demand for transportation fuels that traditionally occurs around the start of the summer driving season which is signaled by the U.S. Memorial Day Weekend.

Figure 1: Crude Oil and Regular Gasoline Price Comparison

(National Average)

Figure 2: Weekly Regular Gasoline Prices

Table 1: Changes in Fuel Prices

¢/L	Week of:	Change from:
	2009-06-02	Previous Week	Last Year
Gasoline	100.2	0.0	-30.9
Diesel	83.6	+1.2	-59.6
Furnace Oil	73.3	-0.3	-61.6

Source: NRCan

Recent Developments

• Kearl Oil Sands Project Goes Ahead: Imperial Oil Limited announced on May 25, 2009, the first phase of the Kearl oil sands project, a surface mining operation northeast of Fort McMurray, Alberta. The Kearl project is envisioned to be developed in three phases and could ultimately produce more than 300,000 barrels of bitumen a day. The first phase of the project, expected to begin production in late 2012 with total production to average 110,000 barrels per day, is anticipated to cost about $8 billion or approximately $4.50 per barrel to construct.Initially, most of the early production from the project will be going to Imperial's two Ontario refineries for processing and a smaller portion will go to the Strathcona refinery near Edmonton.
• U.S. Gasoline Demand Projected to Fall 8% by 2020: According to a report from Hart Energy Consulting, the projected U.S. gasoline demand will decline by nearly 8% between 2008 through 2020, versus the prior projections of a 4% fall in demand. What’s more, should fuel economy standards become stricter past 2016, which is when the new standards will have to be made for model years 2017 to 2021, U.S. gasoline demand may shrink by 10% between 2008 and 2020.
• American Clean Energy and Security Act: The U.S. Energy and Commerce Committee approved The American Clean Energy and Security Act, on May 21, 2009. The American Clean Energy Act promotes renewable sources of energy, carbon capture and sequestration technologies, clean electric vehicles, and the smart grid and electricity transmission. The legislation will attempt to reduce global warming pollution in 2020 by 17% from 2005 levels, by 42% in 2030, and by 83% in 2050.

Retail Gasoline Overview

The average Canadian pump price in selected cities for the four-week average ending June 5, 2009, was 98 cents per litre, an increase of 5 cents per litre from the last report on May 22, 2009. However, this represents a 31 cent per litre decrease compared to the same period in 2008.

The four-week average crude oil price increased by 3 cents per litre to 41 cents per litre compared to two weeks ago. Crude oil is now 42% of the cost component of the total pump price, compared to 61% at the same period last year.

Retail gasoline prices in most Western centres—Vancouver to Winnipeg—increased about 5 cents per litre when compared to the previous report and ranged from 91 cents per litre to $1.05 per litre. Price increases in Eastern cities—Toronto to St. John’s—also rose by 5 cents per litre, and ranged from 94 cents per litre to $1.04 per litre.

At the national level, refining and marketing costs and margins registered an increase of 2 cents per litre to 26 cents per litre.

Figure 3: Regular Gasoline Pump Prices in Selected Cities

Four-Week Average (May 12 to June 2, 2009)

Source: NRCan

* Regulated Markets

Wholesale Gasoline Prices

Wholesale gasoline prices increased in most selected centres for the week of May 28, 2009, compared to the previous week. Overall, price changes ranged from a decline of 1 cent per litre to an increase of 3 cents per litre.

Wholesale gasoline prices in Eastern markets in both Canada and the United States ranged from a decrease of 1 cent per litre to an increase of 2 cents per litre compared to the previous week and ended the period in the 57 to 60 cents per litre range.

In comparison, Western wholesale gasoline price changes ranged from a drop of less than 1 cent per litre to an increase of more than 3 cents per litre and ended in the range of 59 to 60 cents per litre.

Overall, prices in all selected centres are below last year’s level with decreases ranging from 27 cents per litre to 33 cents per litre when compared to the same period last year.

Figure 4: Wholesale Gasoline Prices

Rack Terminal Prices for Selected Canadian and American Cities Ending

May 14, 2009
(Can ¢/L)

Sources: NRCan, Bloomberg Oil Buyers Guide

Gasoline Refining and Marketing Margins

Four-week rolling averages are used for the refining and marketing margins for gasoline. See Figure 5 for the period ending June 2, 2009.

Refining margins for gasoline continue to firm-up. The upward movement is indicative of a tightening in supplies related to an expected increase in demand. Heading into the driving season, refiners, to meet the demand, are now producing more gasoline to increase their inventories.

Higher than normal U.S. gasoline inventories in the last few months helped to moderate the increase in gasoline prices. However, U.S. inventories are now declining quickly in anticipation of the summer demand for gasoline.

This, in turn, creates an upward pressure on wholesale gasoline prices that is ultimately reflected on the retail pump prices.

Figure 5: Gasoline Refining and Marketing Margins

(Four-Week Rolling Average Ending June 2, 2009)
-------Refining Margin _______ Marketing Margin

Source: NRCan

Crude Oil Overview

World Crude Oil Prices Sustained by Expected Increase in Demand

For the week ending May 29, 2009, prices for the three marker crudes averaged between $ 415/m³ and $ 443/m³, ($US59 to $US63 per barrel). This is an increase of $4 to 8/m³ ($US1 to $US3 per barrel) compared to the previous week.

Despite the U.S. crude oil inventories being above the five-year range, world crude oil prices remained buoyed, in part, by the expected increase in demand for transportation fuels—traditionally around the U.S. Memorial Weekend—and the prospect of a global economic turnaround.

However, the driving factor behind current world crude oil prices seems to be less affected by fundamental supply and demand factors and more by the speculative capital flowing back into oil commodities and equities. Prices are moving upward in anticipation of an economic recovery that might still be many months away.

On the other hand, should investors become frustrated with the pace of economic revival and start focusing instead on the large current supply, they might pull their money out of the oil market and push prices back down.

Meanwhile, the appreciation of the Canadian dollar against that of the U.S., means that the impact of rising world crude oil prices is not fully felt in Canada. The Fuel Focus Supplement of February 27, 2009, provides more information on this topic.

Figure 6: Crude Oil Price Comparisons

Changes in Crude Oil Prices

Crude Oil Types	Week Ending: 2009-05-29		Change From:
			Previous Week		Last Year
	$Can/ m3	$US/ bbl	$Can/ m3	$US/ bbl	$Can/ m3	$US/ bbl
Edmonton Par	415.11	59.28	-3.48	+1.30	-385.12	-68.53
WTI	443.23	63.31	+8.24	+3.07	-361.54	-65.77
Brent	434.30	62.04	+7.38	+2.92	-365.16	-66.20

Source: NRCan

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Supplement

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