PHH Report - Fuel Price Update - August 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 June, July, and August 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 increase overall, with changes ranging from a decrease of $0.028 to an increase of $0.101 per litre. The slightly higher pump prices are a result of seasonal demand increases and rising crude oil prices due to increased world consumption, unexpected supply disruptions (including flood-related pipeline and production disruptions in Alberta), and increased uncertainty about oil supplies in oil producing nations, including Egypt with the renewed unrest there. Crude oil prices were around US$107/bbl in mid August. The average retail price for regular gasoline during the second-to-last week of August 2013 was $1.316 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 $0.028 per litre higher on average than those for the 2013 Annual Update, which resulted in either no change or a slight increase in the recommended reimbursement rates for all locations except in New Brunswick, where the Travel rate decreased slightly.

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 increased 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 rates from the 2013 Annual Update (reported in November 2012) were all unchanged or increases of $0.005 per kilometer in the provinces with the exceptions of the Travel rates in Manitoba where it increased by $0.010 and in New Brunswick where it decreased by $0.005. The Commuting and Travel rates both increased by $0.015 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.