Fuel Focus, August 9, 2013
Table of Contents
- National Overview
- Recent Developments
- Retail Gasoline Overview
- Wholesale Gasoline Prices
- Refining and Marketing Margins
- Crude Oil Overview
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Canadian Retail Gasoline Prices Decreased 1.2 Cents per Litre from Last Week
For the week ending August 6, 2013, the average Canadian retail gasoline price was $1.32 per litre. This is a decrease of 1.2 cents per litre from the previous week and an increase of 2 cents per litre from a year ago.
Overall, prices were pushed down as a result of lower wholesale gasoline prices across North America, which in turn are declining partly due to world crude oil prices.
Diesel fuel prices declined 0.3 cents per litre from the previous week. This is an increase of 8 cents per litre from the same period last year.
Figure 1: Crude Oil and Regular Gasoline Price Comparison
Figure 2: Weekly Regular Gasoline Prices
Source: ¢/kg Kent Marketing Services Limited
Irving Oil to Build Marine Terminal: Irving Oil says it plans to build a $300-million marine terminal in Saint John, New Brunswick, following an announcement from TransCanada Corp. that it has decided to proceed with its Energy East Pipeline project. Irving’s marine terminal and refinery would handle crude oil flowing from western Canada and export it to world markets. Engineering and design work would begin in 2015 to coincide with developments of the west-to-east pipeline. (Source: The Canadian Press)
Motor Vehicle Fuel Sales: Gross sales of gasoline declined 0.1% from 2011 to 42 billion litres in 2012. The drop in gasoline sales volume was in direct contrast to the average retail pump price of gasoline across Canada, which rose 3.2% from $1.24 per litre in 2011 to $1.28 per litre in 2012. Ontario, Quebec, Alberta and British Columbia, which accounted for 84% of the total volume of gasoline purchased in 2012, all saw varying degrees of fuel consumption. (Source: The Daily)
- Oil Market Outlook for 2014: The initial forecast for global economic growth in 2014 stands at 3.5%, compared to the revised forecast of 3.0% in 2013. The main underlying assumption is that of a recovery in the OECD, which is expected to grow by 1.8% next year, following 1.2% growth this year. Expected higher growth in the U.S. and a recovery in the Euro zone are the main drivers behind the forecast. Emerging economies continue to expand at levels below the high rates seen in past years. China’s growth is expected to remain at 7.7% in 2014. India’s growth is forecast to increase to 6.0%, up from 5.6% in 2013. (Source: OPEC, Monthly Oil Market Report, July 2013)
Retail Gasoline Overview
The average Canadian gasoline pump price in selected cities for the four-week average ending August 6, 2013 was $1.33 per litre, up 1 cent per litre from two weeks ago and 5 cents per litre higher compared to the same period last year.
Compared to two weeks ago, the four-week average crude oil component increased by 2 cents per litre— 13 cents per litre higher than during the same period in 2012.
Retail gasoline prices in Western centres decreased on average by about 1 cent per litre compared to the previous report two weeks ago, while average prices in Eastern centres increased 3 cents per litre.
Overall refining and marketing costs and margins decreased by 1 cent per litre to 25 cents per litre.
Cities with municipal gasoline taxes (Vancouver and Montreal) had the highest retail prices in Canada, while prices were the lowest in Alberta. Retail gasoline prices in Calgary were 26 cents per litre lower than prices in Montreal, and 31 cents lower than prices in Vancouver.
Figure 3: Regular Gasoline Pump Prices in Selected Cities
Four-Week Average (July 16 to August 6, 2013)
* Regulated Markets
Inflation Up 0.2% in May
According to a Statistics Canada report on gross domestic product released on July 31, 2013, real gross domestic product grew 0.2% in May, a fifth consecutive monthly increase. Service industries, particularly retail and wholesale trade, led the growth in May. The output of service industries expanded 0.5% in May, after increasing 0.4% in April. Increases were also recorded in May in the public sector (education, health and public administration combined), accommodation and food services, professional services and real estate services. The transportation and warehousing sector declined.
Goods production fell 0.3% in May, mainly as a result of a notable decrease in mining, quarrying, and oil and gas extraction. Declines were also recorded in utilities, while manufacturing and the agriculture and forestry sector increased.
Oil and gas extraction receded 2.2% as a result of decreases in both petroleum and natural gas production. Maintenance activities at some petroleum facilities affected production in May.
Source: Statistics Canada
Wholesale Gasoline Prices
Wholesale gasoline price changes ranged from an increase of more than 2 cents per litre in American centres to a decrease of 2 cents per litre in Canadian centres for the week of August 1, 2013. Prices for the period ended in the 74 to 84 cent-per-litre range.
In the eastern markets of Canada and the United States, wholesale gasoline prices registered changes ranging from a decline of 1 cent per litre to an increase of 2 cents per litre compared to the previous week.
Prices for the period ended in the 80 to 84 cent-per- litre range.
Wholesale gasoline prices in western centres ranged from an increase of 2 cents per litre to a decrease of 2 cents per litre, closing the week in the 80 to 90 cent-per–litre range.
Compared to two weeks ago, wholesale prices in Canadian and American centres declined on average by 1 to 5 cents per litre.
Sources: NRCan, Bloomberg Oil Buyers Guide
Gasoline Refining and Marketing Margins
The refining margin for gasoline refers to the difference between the cost of the crude oil and the wholesale price at which a refiner can sell gasoline. The margin includes the costs associated with refining the product as well as a profit for the refiner.
The marketing margin represents the difference between the wholesale and retail prices of gasoline. This margin pays for the costs associated with storing the gasoline until it is delivered and for transporting it to the local service station.
Some of the costs associated with retailing gasoline are related to the volume of gasoline sold while other costs are fixed regardless. This gives large urban retail outlets a definite advantage. With a large throughput capacity per outlet, they can sell high volumes of gasoline at very low profit margins in an attempt to draw customers to their other product offerings. In contrast, smaller outlets will need a higher margin to cover their retailing costs.
Crude Oil Overview
Major World Events Continue to Impact Crude Oil Prices
For the week ending August 2, 2013, prices for the three marker crudes averaged between $640/m3 and $701/m3 (US$99 to US$108 per barrel). Edmonton Par ended at $640/m3 (US$99 per barrel); significantly lower than the previous week and continuing its decline by $44/m3 (US$6 per barrel) from two weeks ago.
Meanwhile, West Texas Intermediate (WTI) registered $684/m3 (US$106 per barrel), marginally lower than the previous week. The Brent crude oil benchmark rose to $701/m3 (US$108 per barrel), up $3/m3 from the previous week. For the week ending August 2, 2013, the price differential between WTI and Brent prices stood at $17/m3 (US$3 per barrel).
Major crude oil price benchmarks fluctuated for the week ending August 2, 2013, in light of improved economic forecasts in the U.S. and protests in Libya’s various sea ports, which affected crude oil exports.
Figure 6: Crude Oil Price Comparisons
|Crude Oil Types||Week Ending: 2013-08-02||Change From:|
|Previous Week||Last Year|
Each International Energy Agency (IEA) member country has an obligation to have oil stock levels that equate to no less than 90 days of net imports.
Currently, there are three net exporting IEA member countries (Canada, Denmark and Norway) which do not have a stockholding obligation under the International Energy Program Agreement.
The IEA minimum stockholding obligation is based on net imports of all oil, including both primary products (such as crude oil, natural gas liquids) and refined products. It does not cover naphtha and volumes of oil used for international marine bunkers.
The 90-day commitment of each IEA member country is based on average daily net imports of the previous calendar year. This commitment can be met through both stocks held exclusively for emergency purposes and stocks held for commercial or operational use, including stocks held at refineries, at port facilities, and in tankers in ports.
The obligation specifies several types of stocks that cannot be counted toward the commitment, including military stocks, volumes in tankers at sea, in pipelines or at service stations or amounts held by end-consumers (tertiary stocks). It also does not include crude oil not yet produced.
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