Nunavut sees early fuel price hike

Nunavut residents will pay eight cents a litre more for all fuel products as of this Sunday, avoiding a 13-cent increase in November, when Nunavummiut will start consuming fuels bought at this year’s high prices and delivered by this summer’s tankers.

“The government has decided to spread it out over a longer period of time,” said Peter Kilabuk, Nunavut’s minister of community and government services.

Kilabuk made the announcement this past Monday. He said if the GN waited until October or November – as in past years – to set new consumer fuel prices, they would have been forced to charge up to 13 cents a litre more to recover the cost of buying this year’s fuel products.

In the meantime, Kilabuk said, the GN will meet hunters and trappers organizations to talk about the impact of higher fuel prices on Nunavut’s harvesters.

And he said the government is also assessing the impact on municipal governments.

After Aug. 1, Nunavummiut will see price increases similar to the following samples:

* Cambridge Bay: from 90 cents a litre as of July 1, to 98 cents a litre;
* Rankin Inlet: 88.3 cents a litre as of July 1, to 96.3 cents a litre;
* Iqaluit: 86.9 cents a litre as of July 1, to 94.9 cents a litre.

But even after these price hikes, Nunavut consumers aren’t doing too badly compared to people in southern Canada.

As of July 1, vehicle owners in Vancouver paid $1.03 a litre for gasoline, Montreal consumers paid about 91 cents a litre, and consumers in Yellowknife paid a whopping $1.12 a litre.

That’s because no one in Nunavut – except the government – pays the real cost of fuel. Nunavut consumers will continue to be protected by a $110-million revolving fund that the GN uses to stabilize fuel prices.

Until now, Nunavummiut have been consuming gas that the GN bought at last year’s lower prices.

But global crude oil prices hit $40 a barrel U.S. this spring, then settled back to about $35 or $36 U.S. for the summer, compared to the 2003 price of about $26 a barrel. This has been caused by China’s booming economy, which has been consuming energy at an every-increasing rate, coupled with low inventories in North America, and instability in the Middle East.

So since the GN’s last round of fuel purchases and summer tanker deliveries in 2003, its cost of purchasing fuel this year has risen by about 40 per cent.

“I think people need to understand that this is something that we absolutely cannot control,” Kilabuk said.

The territorial government’s petroleum products division – which is responsible for overseeing the purchase and delivery of fuel products to all Nunavut communities – has already bought about 70 per cent of this year’s Nunavut fuel supply. These acquisitions began in April.

Kilabuk said that to recover what it must pay for fuel this year, the GN was faced with two choices: make people pay a modest increase now, or make them pay a bigger increase later on.

He pointed out that the GN raised fuel prices once before, in the fall of 2001, when they imposed an 11.9 per cent price hike. This time, he said, the cabinet chose to make the price increase as gentle as possible.

Under contracts signed in January, 2003, the PPD will buy fuels from Shell Canada, and ship them to Baffin and Kivalliq communities on tankers operated by the Woodward Group of Companies of Labrador. Kitikmeot fuels are supplied by Imperial Oil, then shipped by barges operated by the Northern Transportation Company Ltd.

Kilabuk said those new contracts, which replaced earlier arrangements with NTCL, have helped reduce the cost of delivering fuel to Nunavut, and have softened the impact of rising world prices.

At the time, GN officials said the new contracts would save the government $19 million over three years, and on Dec. 5, 2003, Peter Kattuk, then the minister of public works, was even able to announce a modest two-cents-a-litre decrease in fuel prices.

But in its 2003-04 budget, the GN – in anticipation of an energy shock this year – was forced to put more money into the revolving fund that it uses to stabilize fuel prices in Nunavut. That fund will be allowed to rise to $110 million from $90 million.

That means that although Nunavummiut will see more of their disposable incomes going towards fuel after Aug. 1, it’s the GN operating budget that will take the biggest hit.

Because of that, Kilabuk said, the GN will continue to monitor energy consumption closely, and will talk about ways of reducing usage.