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way so as to be able to compete with the price of products that are imported and delivered to Canada because of the build in nature of North American petroleum product markets. A certain pricing discipline is imposed on local refiners because of the existence of the import options, even if no product is in fact imported.

Differences in the price of petroleum products depend on the different products and how they will be used by customers. Most petroleum products are sold on wholesale directly to the customers of fuel, mostly on the contract except automotive fuels. Hence, the prices of petroleum products are more difficult to track since they are less transparent.

A large range of factors unique to the individual markets of petroleum products affect their wholesale price. The prices of different products with which they compete influence the prices of the products.

Economic activity and demand for diesel fuel have a direct relationship, which is manifested by rising truck traffic for the movement of goods and services in a booming economy. Furnace oil for home heating can be easily converted by diesel oil, which is also an automotive fuel. The competition between the uses for supply leads to rising prices.

The distribution of automotive fuels is done through retail outlets to consumers. Therefore, a number of provincial and federal consumption taxes as well as distribution costs are included in the retail price, which is also a tool to increase market share. As a result of this kind of competition in the market, price wars with some low and unstable consumer prices occur.

Supply and demand, costs of crude oil, costs related to distribution, provincial and federal taxes and local market conditions are the factors that influence prices and when they all come together, retail prices, and to lower degree wholesale prices, can change significantly between markets.

Determination of crude oil prices

The global market place is where the price of oil is set. Because of its mobility to different markets by ship, barge or pipeline, oil is traded widely around the world. As a result, it has a worldwide market and its prices are determined by supply/demand balance. Till supply and demand are in balance, prices will rise in the market to attract suppliers from other markets, if there is a shortage in one part of the world.

There is another market that trades in “paper” barrels together with all of the actual barrels of oil that are traded. Oil is bought and sold on contract basis, based on a perceived monetary value of oil. New York, on the NYMEX (New Work Mercantile Exchange), is the two key markets where paper barrels are traded. Based on the expected future market conditions in the future months, or even years, paper contracts for oil are traded in these future markets.

Those that are actually using or producing crude oil and those who buy future contracts for investment purposes, without the aim of taking control of the actual crude oil ever are the two category of buyers and sellers in the future markets. The upcoming markets are used by the first group so as to protect themselves from volatility of prices by locking in their costs or their revenues. The investors of the second group are those who make money by estimating appropriately whether prices will rise or fall later on.

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