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What to know about higher fuel prices in Nunavut

Gasoline, diesel and jet fuel rose 20 cents per litre this month. Why, and where does the money go?
Nunavut Fuel prices remain the lowest in Canada, even after a hike of 20 cents per litre. Image courtesy of the Government of Nunavut

The Government of Nunavut raised retail fuel prices by 20 cents per litre, plus applicable taxes, on Dec. 4.

This affects gasoline, diesel and jet fuel. It puts premium gasoline at $1.40 per litre and diesel at $1.50 per litre.

“These increases reflect rising costs on world crude oil markets. Nunavut remains one of the lowest cost jurisdictions in Canada for fuel products,” the GN stated in a news release.

Retail prices for fuel are typically set in the fall, after the substantial cost of resupply is known, according to information provided by Hala Duale, a communications specialist with the Department of Community and Government Services (CGS).

“Resupply cost and other factors are used to determine the potential change in price. PPD (the Petroleum Products Division) must submit a price change request to the Financial Management Board (FMB). FMB has the decision-making power to approve and deny changes to fuel price based on reasonable financial control.”

Factors contributing to rising fuel prices include global market conditions (global events impact supply and demand), cost of refining crude oil into different products, inflation, Nunavut-specific fuel outages and emergency resupply, value of the petroleum products revolving and stabilization funds… PPD is required to operate on a break-even basis with its expenses being recovered through sales revenues, operating costs, including maintenance, operations and contract services and costs of products acquisition and distribution.”

In previous years, Nunavut only had one fuel price change annually but this year was different.

“The first increase (April 2022) was a result of a federally-imposed carbon tax. The second increase (December 2022) is set by the Government of Nunavut to be based on recovering the cost of purchasing and resupply of fuel for the upcoming year,” the GN stated.

As for how profits from fuel sales are distributed, CGS stated, “Revenues from the sale of petroleum products in Nunavut are remitted to the Petroleum Products Division to offset the cost of purchasing, transporting, storing and distributing the fuel in Nunavut. The Petroleum Products Division operates on a cost recovery model.”

Iqaluit will not be affected by the latest increase in fuel prices as the city’s sale of gasoline and diesel is based on a private business model. Iqaluit gasoline prices benefit from CGS’ bulk purchases but the fuel itself is ultimately owned by UQSUQ Corporation.

The current UQSUQ agreement is a 10-year lease that commenced on Dec. 1, 2021, and expires on Nov. 30, 2031, with an option to renew for an additional five years.

As for the rest of Nunavut, the GN explained that PPD attempts to employ the best strategy to obtain the cheapest fuel prices.

“To ensure Nunavummiut receive the lowest possible prices, PPD uses an early purchase strategy. This strategy has allowed PPD to maintain some of the lowest fuel prices in Canada.”