PHH Report - Fuel Price Update - May 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 March, April, and May 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 decrease overall, which ranges from $0.001 to $0.057 per litre in all locations except British Columbia, Manitoba, and Northwest/Nunavut where prices barely increased by $0.022, $0.017, and $0.001 per litre, respectively. The slightly lower pump prices are primarily a result of short-term seasonal impacts rather than global economic factors. However, global factors that are continuing to apply pressure to prices include actual and anticipated global economic growth, supply disruptions, ongoing threats to the supply in oil producing nations, and anticipated short-term production increases that will outpace consumption. Both crude oil and fuel pump prices have fluctuated somewhat since November, with current average prices fairly in line with those in the 2013 Annual Update. Crude oil prices were around US$95/bbl in mid May. The average retail price for regular gasoline during the last week of May 2013 was $1.281 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 $0.021 per litre lower on average than those for the 2013 Annual Update, which resulted in either no change or a slight 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 unchanged or decreases of $0.005 per kilometer in the provinces. The Commuting and Travel rates decreased by $0.005 and $0.010, respectively, 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.