PHH Report - Fuel Price Update - February 2013

Reimbursement for Business Use of Personal Vehicles

A Study prepared exclusively for

The National Joint Council of the
Public Service of Canada

by PHH Business Analytics

Fuel Price Update

The National Joint Council establishes reimbursement rates for business use of personal vehicles and periodically considers the impact of changing fuel prices on those rates. Rates were established for 2013 based on a comprehensive review of costs as presented in the "Reimbursement for Business Use of Personal Vehicles Model Year 2013 Update" dated November 2012. This update reflects the impact of recent fuel price changes on the recommendations made in the Annual Update. Current representative fuel prices by Province are given in dollars per litre in the following table. These represent pump prices for regular gasoline for December 2012 and January and February 2013. For reference, fuel pricing from the 2013 Annual Update is also shown.

Fuel prices since the 2013 Annual Update last November have shown a slight to moderate decrease overall, which ranges from $0.039 to $0.164 per litre in all locations except Northwest/Nunavut where prices barely increased by $0.001 per litre. The lower pump prices are due more to short-term seasonal impacts and the obscurity provided by averages than they are to global economic factors. Crude oil and fuel prices have actually increased since November due to strengthening of market fundamentals and expectations from A) Saudi Arabia cutting oil production earlier than anticipated and B) greater optimism of global economic growth, particularly in China. Ongoing threats to the OPEC supply in member countries continue to cast uncertainties on the future of oil and fuel prices. Crude oil prices were around US$97/bbl in mid February. The average retail price for regular gasoline during the last week of February 2013 was $1.317 per litre.

In general, fuel prices must change by approximately $0.047 per litre in order to affect a change of $0.005 per kilometer in the reimbursement rate. Pump prices for this update are $0.074 per litre lower on average than those for the 2013 Annual Update, which resulted in either no change or a slight to moderate reduction in the recommended reimbursement rates for all locations.

Reimbursement Impacts

In developing operating costs, the current average pump price is combined with typical vehicle fuel economy to derive the contribution of gasoline to the per-kilometer operating cost. In order to account for the severe operating conditions prevalent in the Territories, we have adjusted the vehicle fuel efficiency in computing fuel expenses for these locations. Our computations continue to reflect an 80% increase in the rate of fuel consumption on a litres per 100 kilometers basis. 

Based on these updated fuel prices, recommended reimbursement rates have either held steady or decreased across the board from the 2013 Annual Update. The following table shows our recommended reimbursement schedule based on current fuel prices, along with those for the 2013 Annual Update.

For both the Commuting and Travel reimbursement rates, the changes from the 2013 Annual Update (reported in November 2012) were all decreases of between $0.005 and $0.015 per kilometer in the provinces except in Ontario, where the Travel rate was unchanged. The Commuting and Travel rates both decreased by $0.010 in Yukon, but both rates were unchanged in Northwest/Nunavut. Note that rate changes for the Commuting and Travel rates are not necessarily the same. When rounded to the nearest half-cent, the change in the contribution of gasoline costs to overall vehicle costs results in slightly different rounded total rates.