The home heating oil industry has a long and proud history, and Fuel Oil News has been there supporting it since 1935. It is an industry that has faced many challenges during that time. In its 77th year, Fuel Oil News is doing more than just holding
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24 March 2014 FUEL OIL NEWS | www.fueloilnews.com S ay the words, "I am from the government and I am here to help" to anyone in our business and it usually generates a grin, rolling eyes, a laugh, a frown, the use of one or more colorful metaphors or some combination of the above. The phrase has been a long-standing joke amongst industry folks as default commentary on the govern- ment's role in the operation of our business. Now try: "The government sets the maximum p rice;" six words that would have most fuel retailers reaching for their defibrillator and nitroglycerine tablets. In mid-February a memo from industry folks in the Province of New Brunswick, Canada, caught my attention. They were buzzing about a decision by the New Brunswick Energy and Utilities Board that had something to do with the EUB "setting the margin for fuel oil." I thought, "must have something to do with fuel subsidies," much like we see here in the states involv- ing the Low Income Energy Assistance Program, where the government seeks discounts for fuel bought for state and federal low income fuel programs. Not even close, I discovered. Turns out that the EUB is the board that regu- lates retail and wholesale petroleum sales in New Brunswick by setting maximum prices for motor fuels and heating fuels; including all grades of gasoline, ultra-low sulfur diesel fuel, heating oil and propane used for heating. I had no idea. The recent action by the EUB granted retail marketers up North the right to increase their rack- to-retail margins on gasoline and heating oil. The increase, according to William Gould, president of the Canadian Oil Heat Association, is the first allowed margin increase for heating oil since 2006. Gould described the regulatory process as intense, and it consumed 8 months of his life from start to finish. When I asked Mr. Gould how the regulatory environment had affected the efficacy of retail fuel marketers in New Brunswick, he said that since 2006 the number of heating oil dealers had dropped from 54 to 27. Half of the marketers gone in less than seven years. "Wow," I thought. During the same period, 30 per- cent of the heating oil market has vanished, according to a published statement by an EUB spokesperson, as heating oil customers move to other fuels including natural gas. Granted, the reasons for further consolidation of the retail fuel marketer numbers are many; however, the setting of maximum prices by the EUB has forced many of those 27 marketers to "go away," so say mar- keters up North. By the way, it's not just heating oil marketers that feel this; 127 retail gasoline outlets have closed as well, said Gould. According to the EUB web site, maximum prices for all fuels are set weekly by the EUB and the rules for setting maximum petroleum prices adhere to a formula set out in regulation. Maximum prices set by the board include regulated wholesale and retail margins, delivery costs and all applicable taxes, the site goes on to say. The Petroleum Products Pricing Act authorized the EUB to make adjustments to the maximum margins (wholesale and retail), maximum delivery costs and the maximum full service charge that motor fuel retailers can charge for dispensing fuel on a full-service basis. The February decision by the EUB stated that "an increase of 5.2 cents per litre to the current retail mar- gin for heating oil is justified and orders that, effective Feb. 6, 2014, the maximum retail margin for heating oil shall be 18.2 cents per litre." The order replaced an interim order. For motor fuels, The board found "that an increase of 0.5 cents per litre to the retail margin for motor fuel is justified and orders that, effective Feb. 6, 2014, the maximum retail margin for motor fuel shall be 6.4 cents per litre." I invite U.S. readers to "do the math" on the con- version of litres to gallons for the sake of perspective. The EUB Decision may be read at http:// www.nbeub.ca/opt/M/browserecord.php?- action=browse&-recid=399 Special thanks to William Gould of the Canadian Oil Heat Association for his contribution to this article. l FON Bio: Shane Sweet is an energy and management consultant with clients in the heating oil, propane and motor fuel sectors. He served the industry as President & CEO of the New England Fuel Institute "NEFI" from 2007 to 2011, and as Executive VP/Director and Lobbyist for the Vermont Fuel Dealers Association "VFDA" from 1993 to 2007. CoNTACT: shanemsweet@gmail 802-558-6101 cell/text. Suggestions by readers for future column content, as well as general comments, are welcome. Shane Sweet OPERATIONAL INSIGHT Six Words