A series of price increases on diesel fuel in New Brunswick over the last week has farmers and fishers expressing alarm about the effect it’s having on their businesses.
“It runs almost every piece of equipment we have,” said Christian Michaud of Michaud Farms in Baie-de-Bouctouche earlier this week.
“We are very worried that the price of diesel is going to make [it] unaffordable for us to farm anymore.”
After separate price increases last Wednesday, Friday and again on Saturday, maximum retail diesel prices in New Brunswick settled in at 246.9 cents, or $2.47, per litre this week.
That brought the cost of buying 50 litres at a service station charging the maximum price to $123.45.
For diesel, it’s not just an all-time record price, it’s $59 more than the same 50 litres cost last year at this time in New Brunswick.
That’s more than double the price increase in gasoline over the last year, even though both fuels are made from the same barrel of oil.
So what’s going on with diesel, and where is that extra money you’re paying going?
Crude oil: $20
Oil prices are the most commonly mentioned issue whenever fuel prices jump, but although they are playing a role, it’s not the largest one.
According to data collected by the energy information company Kalibrate, crude oil imported into eastern Canada from north sea producers in late April this year cost between 35 and 40 cents more per litre than this time last year.
On a 50-litre fill-up of diesel in New Brunswick this week, that is adding up to $20 to the cost for consumers.
It’s significant, but accounts for only about one third of the $59 in higher prices consumers of diesel are paying over last year.
Refinery margins: $30
A much larger factor driving price increases has been the amount earned by oil refineries on diesel and other similar fuels they produce, including furnace oil and jet fuel.
Russia had been a major exporter of diesel to North America. But following Russia’s invasion of Ukraine, sanctions halted that trade almost overnight, causing tight markets and pushing prices to historic highs.
Last week, Tom Nimbley, CEO of New Jersey-based refiner PBF Energy, told analysts refiners are making so much money on diesel products right now that oil companies are doing everything they can think of to supply more.
“Any refiner who knows anything about this business, and most of them do, is doing everything in their power to turn every drop of gasoline into a gallon of jet fuel or diesel because of the current marketplace,” Nimbley said on the company’s first-quarter conference call.
Those same pricing dynamics are happening locally.
Irving Oil Ltd. did not respond to a request for information about its own diesel margins, but figures from its Saint John refinery show petroleum resellers were being charged $1.19 per litre more for diesel last Friday than the same day one year earlier.
Subtracting 40 cents for extra crude costs, the difference suggests oil companies selling from the refinery on Friday were earning an extra 79 cents per litre on diesel over one year earlier.
That is an extreme example, but over the last week wholesale prices charged on diesel were routinely 60 cents higher than last year, after adjusting for crude oil increases.
On a 50-litre fill-up of diesel in New Brunswick this week, an extra 60 cents per litre in higher refinery margins is adding about $30 to the cost to consumers compared to one year ago.
That’s about half of the $59 total difference being paid at the pump.
Taxes and carbon charges: $9
Typically, farmers and fishers are not subject to carbon charges and receive input tax credits for what they spend on the HST. But for regular consumers, those two government charges have also been adding to prices as well.
Carbon charges on diesel increased 2.68 cents on April 1, which adds $1.34 to the cost of 50 litres over what was charged last year.
The impact of federal and provincial sales taxes has been much larger.
At a full retail price of 246.9 cents per litre this week, consumers have been paying 32.2 cents in HST. That’s 15.5 cents higher than the first week of May last year and on a 50-litre fill-up of diesel, it adds $7.75.
Added together, the sales tax and carbon tax increase account for just over $9 of the $59 in higher prices consumers are paying this year over last.
This content was originally published here.