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Nova Scotia gas prices to rise due to COVID-19 markup, energy regulatory says

gas word then up arrow signifying rising prices

Nova Scotia drivers faced higher prices at the pump June 4 after the province's energy regulator approves a price increase to make up for a drop in sales during the COVID-19 pandemic.

The temporary markup comes on top of a permanent increase in the retail margin on gas prices approved earlier this year, as well as federal subsidies some gas stations have received due to a revenue shortfall.

"Motorists can expect to see a small increase in the price at the pump,'' said Paul Allen, executive director of the Nova Scotia Utility and Review Board.

"The board is allowing retailers some temporary relief for the ongoing lower sales volumes due to COVID. That will help ensure they stay in business so gasoline and diesel will be available in local communities.''

Pandemic lockdowns and travel restrictions have drastically curbed demand for gasoline and diesel fuel across Canada, decreasing gas station sales.

A recent report by the Canada Energy Regulator said stay-at-home orders in 2020 resulted in a 15 per cent drop in the overall consumption of refined petroleum products compared to the previous year.

The federal regulator said gasoline consumption volumes fell the most, followed closely by jet fuel, then diesel fuel, with consumption of all three fuels bottoming out in April 2020.

The drop in sales emerged as a particular concern in more rural areas, which tend to sell lower volumes to begin with, limiting their ability to recover losses.

This issue was brought to Nova Scotia's energy regulator by Hilda and Richard Cormier, the owners of a Petro-Canada along Nova Scotia's famed Cabot Trail.

The Cheticamp gas station relied heavily on tourism, and the reduction in visitors to the Cape Breton Highlands National Park as well as restricted travel among locals saw their sales wiped out.

"The Cormiers noted they lost the tourism season in 2020 and said it would take years for sales volumes to recover from the pandemic,'' a decision by the Nova Scotia regulator issued last month said.

Although the regulator committed to a temporary markup on retail gas prices in its decision, the details are expected to be released this week.

The three potential options being considered to temporarily increase gas prices include a rolling 12-month average sales volume, a month-over-month comparison and so-called static adjustment that would be reviewed periodically.

In a letter last week seeking comment from intervening parties, the regulator said it preferred the rolling 12-month average sales volume.

But Nova Scotia's consumer advocate David Roberts urged the regulator to choose a different option, noting that the 12-month average would be the most expensive for consumers as it ``reaches back to the early months of the pandemic.''

``It would be doing what the board said it would not do, that is adjusting the retail margin going forward to offset losses experienced by retailers in the past,'' Roberts, a lawyer with the Halifax firm Pink Larkin, said in a submission to the energy regulator.

"This will necessarily increase the amount of the adjustment and the impact the adjustment will have on the consumers of gasoline and diesel fuel.''

In an interview, he added that the temporary markup should help gas station retailers cope with the ongoing impact of pandemic restrictions.

"It's not supposed to offset losses that occurred last year,'' he said. "But there's recognition that there are continuing impacts as a result of COVID-19 on sales volume.''

The Nova Scotia government regulated gas prices in 2006 after a period of price volatility and a decline in the number of stations. Regulation is intended to provide stable prices from week to week, and ensure the availability of gasoline in rural areas.

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