Canadian Independent Petroleum Marketers Association
Supplying Canadian businesses & families with fuel from coast-to-coast-to-coast
Newsletter February 2015
In this issue...
Guest Columnist:
Jason Parent, VicePresident Consulting, MJ
Ervin & Associates
Advocacy Updates
News Updates
Upcoming Events
Table of Contents
Guest Column .....................................................1
Advocacy Updates ................................................3
News Updates .....................................................4
Upcoming Event s ................................................7
Message from the
President
Welcome to the Canadian Independent
Petroleum Marketers Association February
Newsletter. We are excited to share this issue
with you, and encourage you to circulate it
amongst your colleagues.
In this issue, we have several industry
updates, relevant news items, an advocacy
update and an insightful guest column by
Jason Parent of MJ Ervin & Associates.
We are also looking forward to our upcoming
Canadian Fuel Marketing Conference, to be
held April 13 - 15 at the Four Seasons Hotel
in Toronto. To review the agenda, see a list
of speakers, or to register for the conference,
please click here.
We look forward to seeing you there!
Sincerely,
Tricia Anderson
President and CEO
CIPMA
MISSION
CIPMA’s mission is to ensure the sustainability and
growth of a healthy and viable independent fuel
marketing and distribution sector at both the wholesale
and retail levels in Canada. Our specific goals include:
Ensuring that independent fuel marketers thrive and
have the opportunity to earn a fair and reasonable return
that is proportionate to their business risk and capital
investment, and ensuring that Canadian consumers
and independent fuel marketers have access to a
competitively priced and readily available supply of fuel
products in all regions of the country.
Guest Column
2014 Retail Fuels Market – Year in Review
Jason Parent,
Vice-President Consulting,
MJ Ervin & Associates
(a division of The Kent
Group Ltd)
There’s little question that
the big 2014 news story
surrounding Canada’s energy
sector
has
been
the
unprecedented drop in world
crude prices towards year’s
end. In this context, it may
be difficult to view any part
of the petroleum industry’s
near-term future with any
degree of optimism, yet there
is actually plenty for Canadian
fuel retailers to celebrate: the
past few years have been
particularly
successful
for
Canadian independent fuel
marketers, with several positive
developments for the retail fuels
industry, including tangible
growth in demand and retail
margins.
According to recently released
year-end volumetric data from
The Kent Group, Canadian
retail gasoline demand grew by
1.03 percent in 2014 year-overyear (YOY). This may appear
to be only a modest gain, but
when viewed in a broader
North American context, it is
an encouraging indicator for
Canadian fuel retailers. For
the last five to seven years,
industry observers (including
MJ Ervin & Associates) have
described gasoline demand
with terms like “flattening” or
even “declining”; in the US,
these descriptions have been
appropriate with respect to
retail motor fuels consumption:
down 1.09 percent since 2010.
Canadian consumption has
risen 4.28 percent over that
same time period however, and
has shown steady growth in
each of the last three years.
This broad statistic must be
accompanied by one important
caveat: There have been
significant regional disparities
in Canada’s overall demand
growth; not surprisingly, the
demand growth has been
heavily weighted in areas
with more robust economic
development.
Western
provinces accounted for most
of this demand growth, rising
2.89 percent in 2014 (YOY)
and 11.44 percent since 2010.
Ontario and other eastern
provinces (representing nearly
two-thirds of Canada’s overall
demand) remained virtually
unchanged, up just 0.06 percent
in 2014 (YOY) and 0.66 percent
since 2010. Alberta showed
the strongest provincial growth
in 2014 (at 4.83 percent YOY),
while Quebec was Canada’s
weakest performer, its demand
dropping 1.19 percent YOY.
Remarkably, the Kent Reports
show that Canada’s largest
metropolitan
areas
have
performed rather poorly with
respect to retail fuel demand. The
Greater Toronto Area, Montreal
Metropolitan Community, and
Greater Vancouver Regional
District account for nearly a
quarter of Canadian demand,
yet have exhibited significant
demand deterioration – all three
markets are down 0.55 percent
in 2014 (YOY), and a whopping
9.09 percent since 2010.
When segregated by marketer
type, demand growth for Canadian
non refiner (independent) marketers
surpassed that of integrated
refiner-marketers over the last year.
Non-refiner marketers saw their
sales volume increase 1.87
percent in 2014 (YOY), whereas
refiner-marketers’
volume
increased 0.57 percent. This was
highlighted by Ontario, where
non-refiner marketers’ gasoline
1 | CIPMA Newsletter
volumes rose by 2.22 percent
in 2014 (YOY), while refinermarketers volumes shrank
by 0.59 percent. Considering
Ontario accounts for nearly 40
percent of Canadian gasoline
demand, there is a measure of
significance to this result.
Perhaps the most noteworthy
development in the retail fuel
market has been the rise of retail
margins over the last year. After
remaining relatively flat for the
last 20 years (actually declining
when adjusted for inflation),
the average Canadian retail
margin on gasoline increased
nearly 12 percent in 2014 (YOY)
– reaching 8.2 cents per litre
on a volume-weighted basis.
This represents the highest
average for Canadian gasoline
retail margins on record, and is
likely linked to the slowing rate
of network rationalization and
the maturing of non-petroleum
revenue contributions.
These
higher
margins,
combined with increases in
average site throughput, would
translate into a 14.2 percent
growth in average per-site
petroleum revenue for 2014
(YOY), and nearly 27 percent
since 2010.
Despite
these
promising
indicators,
significant
challenges remain for Canadian
fuel marketers. Costs continue
to escalate – for example,
credit card transaction costs
remain a concern for retailers,
despite a recent reprieve due
to lower pump prices. There
are also a number of unknowns
that will ultimately define the
performance of Canadian retail
fuel demand in the years ahead:
How will the recent drop in retail
prices influence demand? How
will the economic challenges
associated with low oil prices
affect demand in the West – an
area that has been driving the
country’s demand growth in the
last five years? And how will
other factors (such as vehicle
fuel efficiency) impact retail
fuel demand over the next five
years?
Parent’s functional expertise
includes petroleum marketing
economics,
downstream
operations, as well as petroleum
markets and pricing.
One certainty is that the role of
independent marketers in the
Canadian retail fuels market will
continue to grow, regardless
of what the future holds for
fuels demand or rack-to-retail
margins.
The Kent Group produces
extensive
retail
petroleum
data and analysis, including
regular volumetric (market
share)
reporting
and
petroleum price data and
analytics. More information
about our products, market
coverage,
methodologies,
and pricing is available at
www.kentgroupltd.com.
About the Author: Mr. Parent
is the Vice-President Consulting
of MJ Ervin & Associates, a
division of Kent Group Ltd.
His career in the downstream
petroleum
industry
has
spanned nearly 15 years, and
he has worked with wide range
industry and government clients
from across North America. Mr.
2 | CIPMA Newsletter
Advocacy Updates
importation of gasoline from
the United States to ease
intermittent supply shortages
and to improve competitiveness
in Canadian fuel markets.
For more information on our
position, please contact Tricia
Anderson.
Ontario Pension Plan Reforms
Ontario Climate Change
Strategy
The
Ontario
Government
announced earlier this month
that it is seeking public input
on its climate change strategy.
One of the key areas under
discussion is how to implement
a carbon pricing regime, with
the
government
exploring
options including a cap-andtrade system and a carbon tax.
A 45-day consultation period
will see town hall meetings held
across the province, as well
as the opportunity for people
to give feedback online and
through social media.
The government also released
a discussion paper that will be
used to inform the government’s
decision – expected to come
this spring – on which carbon
pricing mechanism to adopt.
To
read
the
discussion
paper, click here. For more
information about meetings,
visit the ministry’s website.
The
Liberal
government
committed to carbon pricing
in 2008 when it signed the
Western Climate Initiative with
California and Quebec, which
have since created a joint capand-trade system.
CIPMA consulted with the
Canadian Fuels Association
following the announcement,
and will be actively participating
in the consultation process.
Should you have any feedback,
or wish to contribute to the
process, please contact Tricia
Anderson directly.
Sulphur in Gasoline
Regulations
CIPMA met with several
government officials earlier
this month from Environment
Canada, Natural Resources
Canada, and the Treasury
Board regarding the proposed
amendments to the Sulphur in
Gasoline regulation.
CIPMA is advocating for
increased flexibilities to the
regulation to ensure easy
Ontario
Premier
Kathleen
Wynne’s Liberals are moving
ahead on public pension reform
through the introduction of the
Ontario Retirement Pension
Plan, aimed at more than three
million workers who do not
have a company plan.
The ORPP calls for equal
contributions from employers
and employees. Each would
contribute a maximum of
1.9 percent on earnings up
to $90,000. The maximum
earnings
threshold
would
increase each year in line with
the Canada Pension Plan’s
earnings threshold, with the
goal to provide a benefit upon
retirement that replaces 15
percent of earnings.
CIPMA is reviewing its position
on the proposed plan, and will
be consulting with members and
other industry representatives
moving forward. Please contact
Tricia Anderson directly should
you have any comments or
perspective to share.
3 | CIPMA Newsletter
News Updates
GLOBAL
Navigant Research releases market data
for medium and heavy duty commercial
electric and hybrid vehicles
• The new report reveals market data for
medium and heavy duty commercial all-electric,
plug-in hybrid electric, and hybrid electric
vehicles. Forecasts for the two hybrid segments
fueled primarily by oil-based products (HEVs
and PHEVs) are broken down by region and by
fuel (gasoline or diesel). For a more complete
synopsis of the report, click here.
IEA warns that oil recovery will take time,
and announces new executive director
• IEA warned that the price of crude is
unlikely to return to the levels seen over the last
five years and that a recovery will take time. IEA
also announced its next Executive Director: Dr.
Fatih Birol, the current IEA Chief Economist,
and Director of Global Energy Economics.
UNITED STATES
Obama vetoes Keystone pipeline
• President Obama used his veto authority
to reject approval of the Keystone XL pipeline
which would connect Canada’s oil sands with
refineries on the Texas Gulf Coast that specialize
in processing heavy crude oil. The Keystone
pipeline review process has extended over six
years.
DOE Joins Shell Canada For Carbon
Storage Tests
• The U.S. Department of Energy is teaming
with Royal Dutch Shell PLC’s Canadian arm to
test technology for monitoring the underground
storage of carbon dioxide, pledging $500,000
to the effort.
32 U.S. Senators urge EPA to approve
increased biodiesel volumes
• The senators expressed concern about the
agency’s delays in implementing the Renewable
Fuel Standards for 2014, 2015 and 2016, noting
that the delays have created tremendous
uncertainty for the U.S. biodiesel industry.
New Hampshire House votes to stay in
cap-and-trade program
• New Hampshire is one of the nine states
participating in the Regional Greenhouse Gas
Initiative, a market-based approach to reducing
carbon emissions.
NATIONAL
National gasoline prices averaged 103.7
cents per litre this month
• According to Ontario’s Gasoline Report
(Weekly Summary), the Canadian regular
gasoline price increased this month to 103.7
cents, a three-month high. The Canadian retail
diesel price increased for the third straight
week, by 3.5 cents to 117.8 cents, a two-month
high.
Canadian marketing margin fell 1.2 cents
per litre in January, according to The Kent
Group
• The significant downward pressure on
gasoline prices resulted in a squeeze on both
refining and marketing margins in January. The
average Canadian marketing margin fell 1.2
cents per litre, after remaining above historical
levels for the previous three months.
4 | CIPMA Newsletter
Spread in current gasoline and diesel
prices due to differences in inventory and
demand, Kent Group reports
• Market disparities have resulted in gasolinerelated refining margins decreasing roughly
5 cents per litre from June 2014 to January
2015, whereas diesel-related refining margins
rose more than 14 cents over that same time.
In an interview, Michael Ervin of MJ Ervin &
Associates said that more gasoline price hikes
are likely on the way.
Canada looking at LNG tax breaks in
federal budget
• The Canadian government is studying
the idea of providing new tax breaks in the
upcoming federal budget for companies
that build liquefied natural gas (LNG) export
terminals.
European Union to treat Canadian oil
sands as equal under new fuel directive
• EU’s new fuel quality directive (FQD) will
treat Canada’s oil sands on a level playing field
with other sources of oil around the world,
creating new export opportunities for energy
and allowing Canada to compete more freely in
the global market.
Canada’s premiers agree to coordinate
climate plan as oil prices drop
• Provincial leadership discussed rolling out
a national energy strategy at the annual winter
meeting of Canadian premiers in Ottawa. The
strategy is aimed at both feeding the economy
and addressing the country’s carbon emissions.
Various Enbridge pipelines move forward
• NEB has given Enbridge permission to
open its reversed Line 9 pipeline, providing
western oil producers with direct access to
Quebec refineries for the first time in 17 years.
To read more on this development, click here.
• Enbridge Inc. has applied with the National
Energy Board for permission to begin filling
its new 570, 000 barrel per day Edmonton to
Hardisty, Alberta, pipeline with oil on March 17 –
earlier than the April 1 date previously reported.
To read more on this development, click here.
Ontario energy minister cites concerns
about Energy East Pipeline
• Energy Minister Bob Chiarelli announced
that a review of the Energy East Pipeline
project has exposed “significant concerns”
about its potential impact on First Nations, the
environment and the price of natural gas.
Canada accuses EPA of ‘distortion and
omission’ in Keystone XL assessment
• In a released letter, the EPA reported
that the Keystone XL pipeline might worsen
greenhouse-gas emissions. Ambassador Gary
Doer responded with a letter stating that the
EPA assessment ignores a decade of Canadian
achievement in cutting greenhouse gas
emissions, and the innovation that has occurred
at the oil sands in recent years.
WESTERN REGION
New act positions B.C. to regulate LNG in
federal ports
• British Columbia’s Deputy Premier and
Minister of Natural Gas Development Rich
Coleman introduced Bill 12, the Federal Port
Development Act (FPDA), which will extend
provincial authority and application of provincial
law to LNG-related development on federal port
lands.
Falling oil prices will greatly impact oil
firms’ investment plans, says CAPP
• According to the Canadian Association
of Petroleum Producers, as prices of oil in the
world market drop, so too will investment in
the oil sands in Western Canada, forecasting a
slash of as much as $23 billion from the capital
spending of various oil firms.
5 | CIPMA Newsletter
Imperial Oil to build new oil sands
research centre in Southeast Calgary
• The new research centre will continue
Imperial’s progress in developing nextgeneration resource recovery technologies
for safely and efficiently developing oil sands
resources. Full occupancy of the new centre is
planned for 2017.
ONTARIO / QUEBEC REGION
Wynne introduces climate change
discussion paper – plans to introduce
‘carbon pricing’ by spring
• The discussion paper is to act as a tool
to create a dialogue on the issue, as Ontario’s
Ministry of the Environment and Climate Change
embarks on a 45-day process of meetings/
dialogues throughout the province to formulate
an official position for a low-carbon economy.
To read the discussion paper, click here. For
more information about meetings, including
a schedule and meeting locations, visit the
ministry’s website. As previously noted, CIPMA
will be submitting comments on this issue as
part of the consultation process.
CAA-Quebec’s review of gas prices: Not all
equal in the eyes of the industry
• Renewed competition in Quebec City,
deceptive price stability in Sherbrooke, and
sharp, unjustified increases in Montreal are
among the comments in CAA-Quebec’s annual
review of gasoline prices. In addition, the
review noted a number of dramatic disparities
in pricing across regions of the province.
ATLANTIC REGION
New group calls on Prince Edward Island
to ban fracking this spring
• A new citizens group, Don’t Frack P.E.I., is
taking a message across the province – they
want the provincial government to establish
a permanent ban on fracking anywhere on
the million-acre sandbar. P.E.I. Environment
Minister Janice Sherry says her government will
be consulting results of current studies before
taking a stance on the issue.
Eastern Canadian LNG export plans face
supply quandary
• Large-scale investments are needed to
expand regional LNG pipeline capacity to be
able to feed the large energy markets overseas.
If successful, the projects would provide an
economic boost in Canada’s Atlantic provinces,
broaden the market for plentiful North American
gas, and shore up energy security in parts of
Europe.
Potential strike looms at Come By Chance,
Newfoundland oil refinery
• After over a month of negotiations over a
new contract, a mid-March strike looms unless
the two sides can come to an agreement.
TransCanada says it will decide on Quebec
oil terminal by March 31
• TransCanada Corporation said it will decide
by March 31 whether to proceed with an oil
export terminal in Quebec, which has come
under fire from environmentalists who say it
poses a threat to beluga whales.
6 | CIPMA Newsletter
Upcoming Events
Canadian Fuel Marketing Conference
•
At this year’s conference, we have an incredible
line-up of speakers and panelists that will cover
the most important aspects of your business—
including logistics, carbon regimes and the future
direction of transportation fuels.
1.
Bill Peters, Argus Media: Carbon Pricing
Mechanisms and Standards in the Fuel
Sector
2. James Spencer, Portland Fuels: Fuel
Hedging 101
April 13-15, Toronto - Register Today!
Don’t miss a minute!
Conference highlights include:
•
Opening session: John Eichberger, Fuels Institute on The Future of Transportation Fuel
•
Keynote
speakers
including
Peter
Tertzakian, ARC Financial, and Glen
Hodgson from The Conference Board of
Canada
•
An update on Canada’s refining sector
•
A panel discussion: Logistics of Petroleum
Products in Canada-Challenges and
Opportunities featuring David Bradley
(Canadian Trucking Alliance), Ken Green
(Fraser Institute) and Mathieu Lefebvre (CN)
•
The latest perspective on Customer Loyalty
programs
•
Closing keynote speaker: John Wright,
Ipsos
Public
Affairs
presenting
DemandShift:
Leading
Canadian
Business in the 21st Century
•
Two concurrent closing workshops:
An opportunity to meet CIPMA board
members and the CIPMA team at the
fantastic new Four Seasons Hotel
*There are still sponsorship opportunities available.
For more information on the conference, including
agenda, sponsorship and registration, please visit
our website.
Western Members Meeting
Mark your calendars – the CIPMA Western
Members Meeting will take place on Tuesday,
June 23, 2015 in Vancouver, British Columbia. The
location of the meeting will be announced in the
near future.
CIPMA Golf Challenge
The 2015 CIPMA Golf Challenge will be held at a
new location this year. Please join us on Thursday,
September 17, 2015 at RattleSnake Point Golf
Club in Milton, Ontario.
CIPMA AGM and Eastern Members
Meeting
CIPMA’s AGM and Eastern Members Meeting
will take place on Tuesday, October 6, 2015 in
Moncton, New Brunswick.
7 | CIPMA Newsletter