Furnace oil prices driven up by pre-election changes

A decision by the New Brunswick government to make consumers pay diesel prices when they buy furnace oil has driven the cost of the fuel in the province to among the highest in the region.

Daphne Reid, a Saint John resident, bought oil in November at prices 13 cents per litre higher than those being charged in Prince Edward Island on the same day.

"It can't be justified in my opinion," she says.

Prince Edward Island gets much of its furnace oil from Saint John and Reid says she can't understand why her proximity to the refinery doesn't result in a better deal for her.

"I can be there in 90 seconds if I drive fast," she says.

"If they [P.E.I. companies] are selling furnace oil for 13 or 14 cents a litre cheaper than New Brunswick, I can't even imagine a satisfactory explanation as to why. It's unimaginable'  

Price differences like that have been constant this fall.

The price differences follow a decision by the former Progressive Conservative government of David Alward, which was implemented days before the provincial election campaign started in August.

It changed heating oil regulations to allow consumers in New Brunswick to be charged diesel prices when they buy furnace oil, a move that increased prices instantly.

This week it added about eight cents per litre to prices in the province.

In August, the provincial government said the change was made to save small, home delivery companies, who were being charged diesel prices by the oil companies who supply them and were in danger of failing because of it.

New Brunswick has a regulated maximum price for furnace oil for consumers, but it has no rules about wholesale prices to resellers.

That allowed oil companies to begin charging diesel prices to small retailers two winters ago, even though they were buying furnace oil. Because small retailers could not pass those costs along to consumers who were protected by regulation, their margins shrank to breakeven levels and below.

"There is nowhere to go,” Woodstock furnace oil retailer Peter Clark told the Energy and Utilities Board during hearings last year.

"You are capped on the top. You are capped on the bottom."

Change designed to help small businesses

Veronique Taylor, a provincial government spokesperson, said many firms were in danger of going out of business because of the higher prices imposed on them by oil companies and a decision was made to let those costs be passed along to consumers instead.

"The amended formula will ensure that consumers throughout the province, especially in rural areas, have no interruptions to their supply of furnace oil from retailers who have seen their margins severely reduced in recent years." said Taylor.

However, the change has also generated some of the highest prices to consumers in the region. Meanwhile, at least one province did not allow the problem to develop in the first place.

In Newfoundland and Labrador, oil companies are required to charge small resellers furnace oil prices if they are buying furnace oil. That is the single biggest factor behind furnace oil prices in St. John's being set 15.5 cents per litre lower than in New Brunswick this week. 

Also, next door in the more competitive markets of Maine, consumers are still being charged furnace oil prices, not diesel, even though the state imports much of its fuel from New Brunswick.  

In Bangor on Monday, furnace oil was the equivalent of 79 Cdn cents per litre delivered to area homes, 20 cents lower than in New Brunswick. Further south in Portland, Me., furnace oil prices were 27 cents per litre cheaper.

New Brunswick's Energy Minister Donald Arseneault said he is not opposed to undoing the Alward government changes, if a solution does not harm small retailers, including looking at regulating wholesale prices oil companies can charge.

"These changes have only been brought forward a couple of months ago so it’s kind of early to make a full assessment to make if these were the right changes to make or not," said Arseneault.

"We're going to monitor the situation and if we feel it is problematic, definitely our department is going to look at it and bring forward changes that will make it better for homeowners and the business community."