Thank you, Mr. Speaker. On February 6, 2015, the Minister of Public Works and Services announced an immediate fuel savings of eight to nine cents per litre in 16 communities that it serves. This is indeed great news for these NWT residents and I applaud the government for finally capturing the recent lower fuel prices by passing on such savings and helping to lower the cost of living for our Northerners. However, upon further analysis, I do have questions for the Minister.
Can the Minister indicate by what methodology did Public Works and Services come up with the eight to nine cents per litre saving model for these 16 communities? Thank you.
Thank you, Mr. Dolynny. Minister of Public Works, Mr. Beaulieu.
Thank you, Mr. Speaker. We determine price by the actual price of the products and the transportation of those products and, of course, the distribution once they are in the community. We look at those and, recognizing that the fuel was not actually in the community yet, we are looking at the rack price of fuel down south and when we are going to buy, anticipating the transportation costs in there, and we were very comfortable with the reduction. We could anticipate more reductions, as well, later on in this winter road season. Thank you.
From the Minister’s own words, it sounds like some of this fuel is not yet in the community and it appears that the PWS fuel services’ buying strategy is using some form of hedging that they are applying and passing to the customers. This strategy would suggest that these fuel savings would extend well into next season’s bulk purchases as well.
Can the Minister elaborate? Are these fuel price savings being hedged over a two-year window? Thank you.
These prices are for this year. We think that the price may stabilize or go back up a bit, but we haven’t hedged the cost of fuel moving forward. We have the Stabilization Fund that’s designed to stabilize the fuel costs in the communities. When the fuel prices go down, we increase the Stabilization Fund. When the fuel prices go back up, we decrease the Stabilization Fund, keeping it stable but not two years into the future. Thank you.
Even if we’re using the term “stabilization,” it’s still a form of a hedging because we’re balancing out those prices. Should this hedging concept produce even greater savings per litre with a new summer bulk purchase program and should fuel prices remain the same or stabilize, does the Minister see further reduction of the price per litre being passed on to the residents in these communities? Thank you.
Yes, we do.
Thank you, Mr. Beaulieu. Final, short supplementary, Mr. Dolynny.
Thank you, Mr. Speaker. I appreciate the Minister’s reply there. Some jurisdictions in North America are stockpiling fuel at today’s market price. Some are renting extra storage and realizing that these fuel savings trump storage costs.
If this is indeed the case, can the Minister indicate if his department is considering doing the same to keep stretching these savings to the residents? Thank you.
The shelf life of fuel is about three years, and we also need the capacity in order to store fuel. The Member is correct; there are possibilities of renting storage for fuel, but I think the cost of fuel would have to be considerably lower than what we’re anticipating in the future in order to make it feasible. So right now we’re looking at filling up our own capacities, to buy as much fuel as possible at this point with the capacity that we currently have without renting from outside of government. Thank you, Mr. Speaker.
Thank you, Mr. Beaulieu. Mr. Nadli.
