Reimbursement for Business Use of Personal Vehicles
Study prepared for The Treasury Board of Canada Secretariat
By Corporate Fleet Services
1 Fuel Price Update Synopsis
Corporate Fleet Services (CFS) has been mandated by the Treasury Board of Canada Secretariat to perform the Annual evaluation of per-kilometre reimbursement rates for government employees required to use their personal vehicles while performing government business. Furthermore, the periodic impact of varying fuel prices was to be evaluated quarterly by producing three additional ‘Fuel Price Updates' per year. The present document represents the Update for May 2015.
The Annual study established reimbursement rates for each Canadian Province and Territory after performing a comprehensive analysis of all vehicle operating expenses. These rates were presented in the ‘Reimbursement for Business Use of Personal Vehicles Report', dated November 2014 (for publication on January 1st 2015).
The present Update reflects the impact of current fuel prices on the Travel and Commuting Rates recommendations made in the Annual Report with a focus on average pump prices of gasoline by Province or Territory. The prices were averaged for each Province or Territory for the three months prior to the release of the current Update (the months of March, April and May 2015). All prices are given in dollars per litre.
This Update also presents up-to-date recommended rates of reimbursement for consideration by the Treasury Board Secretariat in dollars per kilometre. Federal and provincial sales taxes were also researched to determine if there were any recent changes that could have had an immediate impact on the total costs of vehicle ownership and operation.
For the period March - May 2015 fuel expenses represent 20.6% of the total cost of vehicle operation or a Canadian average of 10.3 cents per kilometre. The present update identified increases in average gasoline prices across Canada, which had a slight impact on the reimbursement rates. As a result, reimbursement rates for the ten Provinces increased between 0.5 and 1.5 cents relative to the previous Fuel Update (February 2015), with the greatest change being an increase of 1.5 cents in both the Travel and Commuting rates in British Columbia. The rates have remained fairly constant for the Territories, with no change for Nunavut and Northwest Territories and a decrease of 0.5 cents for the Yukon.
2 Fuel Prices
2.1 Energy market context
Corporate Fleet Services (CFS) has been mandated by the Treasury Board of Canada Secretariat to perform the Annual evaluation of per-kilometre reimbursement rates for government employees required to use their personal vehicles while performing government business. Furthermore, the periodic impact of varying fuel prices was to be evaluated quarterly by producing three additional ‘Fuel Price Updates' per year. The present document represents the Update for May 2015.
The Annual study established reimbursement rates for each Canadian Province and Territory after performing a comprehensive analysis of all vehicle operating expenses. These rates were presented in the ‘Reimbursement for Business Use of Personal Vehicles Report', dated November 2014 (for publication on January 1st 2015).
The present Update reflects the impact of current fuel prices on the Travel and Commuting Rates recommendations made in the Annual Report with a focus on average pump prices of gasoline by Province or Territory. The prices were averaged for each Province or Territory for the three months prior to the release of the current Update (the months of March, April and May 2015). All prices are given in dollars per litre.
This Update also presents up-to-date recommended rates of reimbursement for consideration by the Treasury Board Secretariat in dollars per kilometre. Federal and provincial sales taxes were also researched to determine if there were any recent changes that could have had an immediate impact on the total costs of vehicle ownership and operation.
For the period March - May 2015 fuel expenses represent 20.6% of the total cost of vehicle operation or a Canadian average of 10.3 cents per kilometre. The present update identified increases in average gasoline prices across Canada, which had a slight impact on the reimbursement rates. As a result, reimbursement rates for the ten Provinces increased between 0.5 and 1.5 cents relative to the previous Fuel Update (February 2015), with the greatest change being an increase of 1.5 cents in both the Travel and Commuting rates in British Columbia. The rates have remained fairly constant for the Territories, with no change for Nunavut and Northwest Territories and a decrease of 0.5 cents for the Yukon.
2.2 Gasoline prices across Canada
Gasoline prices in Canada have also rebounded during the past four months as compared to their low point at the beginning of the year. The most important factors that affected gasoline prices over the past few months were an increase in the price of crude, typical seasonal factors as well and currency exchange rates.
As expected, the price fluctuations of crude oil had a direct impact on the gasoline prices at the pump. The rebound of global oil prices was the primary factor that drove up gasoline prices across all Canadian Provinces. The highest increase was seen in Alberta and BC, mostly due to the sharp appreciation of the Canadian crude price versus the WTI price. The Territories, on the other hand, have exhibited a much less significant change, as they are slower to respond to global trends due to the lower demand. Gas prices in Nunavut and the Northwest Territories remained constant while the Yukon registered a slight decrease – the only Canadian region to display this trend for the past three months.
Another important factor of the change in gasoline prices is the seasonality: every year, refineries have to undertake maintenance and seasonal transition from winter-blend to summer-blend fuel. This creates slight disruptions in the supply of gasoline and leads to an increase in prices for consumers. Furthermore, summer-grade fuel undergoes a more elaborate refining process and is thus more costly to produce.
Currency markets also had a significant effect on gasoline prices, especially in early spring. The appreciation of the US dollar led to an increase of the price of gasoline in Canada. As most of the refined products consumed in Canada are coming from the United States, the appreciation of the US currency makes these imported goods more expensive. Nevertheless, the Canadian dollar has exhibited a slight appreciation since mid-April, partially off-setting this trend.
The trend of future prices at the pump is extremely difficult to predict with any degree of confidence. The current energy market still displays signs of volatility that adds to the seasonal effects of switching to summer-grade gasoline as well as the impact of record inventories of fuel. These factors will probably display a mixed effect and make future prices at the pump hard to project.
In Canada, prices of gasoline at the pump include all applicable taxes. Prices vary significantly across the country, mainly due to the difference in the types and amounts of taxes being charged in different Provinces and Territories. The present Update calculated the average prices of regular gasoline charged at the pump during the past three months. The fuel price data was primarily obtained from Natural Resources Canada, based on weekly published fuel prices for 60 locations across Canada. This data was verified against an additional database made available by MJ Ervin and Associates that similarly tracks fuel prices all across Canada. Additionally, the data was spot-checked by using information available through Statistics Canada as well as other popular gasoline price reporting websites such as www.GasBuddy.com, www.GlobalPetrolPrices.com and www.TomorrowsGasPriceToday.com.
Consistent with the methodology of the Annual Report, when determining average gasoline prices per Province or Territory, we have used weighted averages according to population in order to better conform to reality. In this manner, metropolitan population centers account for a greater portion of the total average price compared to smaller towns.
The following is a table with average regular gasoline prices for all Canadian Provinces and Territories, in dollars per litre, for the period March - May 2015:
|
Province/Territory |
Current fuel |
April 1st 2015 |
Price |
|---|---|---|---|
|
Alberta |
$0.937 |
$0.841 |
$0.096 |
|
British Columbia |
$1.244 |
$1.094 |
$0.150 |
|
Manitoba |
$0.953 |
$0.872 |
$0.081 |
|
New Brunswick |
$1.080 |
$0.981 |
$0.099 |
|
Newfoundland and Labrador |
$1.150 |
$1.053 |
$0.097 |
|
Nova Scotia |
$1.117 |
$0.998 |
$0.119 |
|
Ontario |
$1.072 |
$0.977 |
$0.002 |
|
Prince Edward Island |
$1.086 |
$0.993 |
$0.000 |
|
Quebec |
$1.188 |
$1.078 |
$0.095 |
|
Saskatchewan |
$0.979 |
$0.913 |
$0.093 |
|
Northwest Territories |
$1.153 |
$1.151 |
$0.110 |
|
Nunavut |
$1.269 |
$1.269 |
$0.066 |
|
Yukon |
$1.072 |
$1.100 |
($0.028) |
Fuel price data was extracted for a period of three months (March 3rd to May 26th 2015) in order to reflect current gasoline price trends. Subsequent reports will focus on three-month periods following the period covered in the present study. Average gasoline prices per litre and per Province or Territory were found to vary between $0.937 in Alberta to $1.269 in Nunavut, with a Canadian average of $1.105, an increase of 11.1 cents from the previous Fuel Update (April 1st 2015). The lowest price was recorded in Edmonton at 84.4 cents per litre and the highest in Vancouver at 134.6 cents per litre.
2.3 Sales taxes
For the current Update research was performed to see if there were any relevant changes to Federal and Provincial sales taxes that could have an immediate impact on the reimbursement rates. As of the date of this Update, no changes were observed in sales taxes anywhere in Canada. Moreover, no changes are foreseen at this time in the immediate future.
3 Impact of Fuel Prices on Reimbursement Rates
3.1 Fuel consumption
In calculating the fuel costs contribution to the total vehicle operating costs, the methodology employed in the Annual Report was strictly adhered to. Fuel consumption for every vehicle model in the study was thus combined with average prices per Province or Territory to determine the fuel portion of operating costs, based on an average of 20,000 kilometres per year.
3.2 Updated reimbursement rates
For comparison, the following table provides updated evaluations for both the Travel and Commuting rates, as well as rates previously calculated for the April 1st 2015 Fuel Update and for the January 1st 2015 Annual Report:
May 2015 Fuel Update Reimbursement Schedule (in dollars per kilometre)
|
Travel Rate |
Commuting Rate |
|||||
|---|---|---|---|---|---|---|
|
Province/Territory |
Current Fuel Update |
April 1st 2015 Fuel Update |
Jan 1st 2015 Annual Report |
Current Fuel Update |
April 1st 2015 Fuel Update |
Jan 1st 2015 Annual Report |
|
Alberta |
$0.435 |
$0.425 |
$0.450 |
$0.170 |
$0.160 |
$0.185 |
|
British Columbia |
$0.480 |
$0.465 |
$0.485 |
$0.210 |
$0.195 |
$0.215 |
|
Manitoba |
$0.455 |
$0.450 |
$0.475 |
$0.180 |
$0.170 |
$0.200 |
|
New Brunswick |
$0.480 |
$0.470 |
$0.495 |
$0.190 |
$0.180 |
$0.205 |
|
Newfoundland and Labrador |
$0.510 |
$0.500 |
$0.525 |
$0.200 |
$0.190 |
$0.210 |
|
Nova Scotia |
$0.490 |
$0.480 |
$0.505 |
$0.195 |
$0.185 |
$0.210 |
|
Ontario |
$0.540 |
$0.535 |
$0.555 |
$0.190 |
$0.180 |
$0.205 |
|
Prince Edward Island |
$0.475 |
$0.470 |
$0.495 |
$0.190 |
$0.185 |
$0.210 |
|
Quebec |
$0.500 |
$0.490 |
$0.510 |
$0.210 |
$0.200 |
$0.220 |
|
Saskatchewan |
$0.450 |
$0.445 |
$0.470 |
$0.180 |
$0.175 |
$0.200 |
|
Northwest Territories |
$0.595 |
$0.595 |
$0.625 |
$0.255 |
$0.255 |
$0.285 |
|
Nunavut |
$0.610 |
$0.610 |
$0.610 |
$0.270 |
$0.270 |
$0.270 |
|
Yukon |
$0.595 |
$0.600 |
$0.625 |
$0.245 |
$0.250 |
$0.280 |
Note: All figures were rounded up to the nearest half-cent.
The impact of gasoline prices on the reimbursement rates was moderate for the present Fuel Update versus the April 1st 2015 Fuel Update. The reimbursement rates saw increases between 0.5 cents and 1.5 cents per kilometre for the Provinces. For the Territories, both rates have remained constant with the exception of the Yukon that saw a decrease by 0.5 cents per kilometre. Canadian weighted averages have increased by 0.5 cents for the Travel rate and by 1.0 cent for the Commuting rate, and are now at 50.0 cents per kilometre and 19.5 cents per kilometre respectively.
Fuel contributes on average 10.3 cents per kilometre to total operating costs, ranging from 8.7 in Alberta to 16.2 in Nunavut. With the continued volatility of the energy markets, determined by global factors that are difficult to forecast, it is hard to make any prediction regarding gasoline prices for the next three-month period. However, any future changes will be reflected in the next Fuel Update.