The petroleum revolving fund has a limit of $5 million. The purpose of the fund is to subsidize the storage and distribution of petroleum products in 17 remote communities in the Northwest Territories. Committee members, in light of the recent increase in the price of oil, the petroleum revolving fund may have exceeded its $5 million limit.
The department replied that the fund currently has a deficit of $2.8 million and is projected to add another $1 million in debt for the upcoming fiscal year. The Minister further explained that increases in the price of petroleum products in the department's client communities averted any chance of the fund exceeding its cap.
Committee members commented that the prices of petroleum products were already high and the recent price increase made by the department did not help any. Many consumers are also not aware of subsidies for fuel.
The committee noted that the high price of fuel especially affects the elderly and those on income support. This puts extra strain on the resources of the government's social envelope. Many consumers are also not aware of subsidies for fuel.
Committee members recommended that absorbing any increases in the price of fuel may very well mean savings for the government in other activities, such as within the social envelope.
At the request of the committee, the Minister agreed to provide the fuel pricing rationale for review by Members. The committee also recommended that subsidies for fuel be clearly identified for the consumer.
Privatization of Petroleum Products Division (PPD)
Committee members were concerned that if the PPD were to be privatized, it should be sold in its entirety to one corporation, thus ensuring economies of scale are maintained. Any community not supplied by the potential purchaser will require further fuel price subsidization by the government, which will no longer have any economy of scale of its own. The result of not selling the entire operation to one entity would most likely mean higher levels of government expenditures to maintain an affordable level of fuel pricing in unserviced communities.
Committee members also noted that by selling the PPD, subsidies to the fuel price might no longer be possible, as the government will no longer be in the petroleum storage and distribution business.
The government, at the request of the committee, agreed that if the petroleum products division was to be considered for sale, a call for proposals would be publicly advertised, and the division be sold as a single entity.