Heavenly Paradise@AdelineAng.com

The fluctuating prices of fuel is something interesting to observe. The fuel prices are different across Canada and they vary every week (at least in this city). New fuel prices take effect on every Thursday in Fredericton. For those who pay close attention to the fuel prices announcement the day before, have the opportunity to fuel up their fuel tanks or wait for a bit, depending on the fluctuation in fuel prices. You’ll be surprised how much can be saved, especially for those who travel a fair bit throughout the week!!

It’s almost like the stock market to me, except it’s with a weekly fluctuation. The change in fuel prices has a lot to do with supply and demand, political issues, and whatnot. The rising of fuel prices leads to cost increases in almost everything; groceries, transportation fare etc. The funny thing is, these prices will almost never go down even if the fuel prices decrease. I supposed that’s the way it is, even in many other places around the world.

How about the fuel prices in Malaysia? The citizens were shocked to learn that price of gasoline increased by 40 %, from RM1.92/litre (CAD 0.69/litre) to RM 2.70/litre (CAD 0.96/litre) and diesel price rose from RM1/litre to RM2.58/litre, after the local government decided to cut down on fuel subsidization, in June 2008. The good news is, reduction of fuel prices was introduced later, partly due to the drop in global oil prices. As of December 2008, gas price stood at RM1.90/litre and diesel price at RM1.80/litre.

One of the biggest questions I had when I first arrived in Canada: why is diesel cheaper than regular gasoline? It’s the opposite in Malaysia, where diesel price is always lower than that of gas. Basic chemistry is telling us that diesel is less refined and cheaper to processed from crude oil; it’ll only make sense that it’s cheaper than regular gas. How come this is not the case in Canada (and some other countries)?

Here is a good explanation for it:

Until several years ago, the average price of diesel fuel was usually lower than the average price of gasoline. In some winters when the demand for distillate heating oil was high, the price of diesel fuel rose above the gasoline price. Since September 2004, the price of diesel fuel has been generally higher than the price of regular gasoline all year round for several reasons. Worldwide demand for diesel fuel and other distillate fuel oils has been increasing steadily, with strong demand in China, Europe, and the U.S., putting more pressure on the tight global refining capacity. In the U.S., the transition to low-sulfur diesel fuel has affected diesel fuel production and distribution costs. Also, the Federal excise tax on diesel fuel is 6 cents higher per gallon (24.4 cents per gallon) than the tax on gasoline.

Other articles which you might find interesting to read:
Why is Diesel More Expensive Than Regular Gas?
Why is Diesel Fuel More Expensive Than Gasoline?
Why is Diesel Even More Expensive Than Gas?

Will diesel ever be cheaper than gasoline again? You bet!  Here is what happen in the United States:

Conversely, diesel prices are falling as a result of a milder than usual winter which has left heating oil stocks at higher than normal levels. That means that more crude can be refined into nearly identical diesel fuel. Supplies of diesel will rise quickly, but demand is not likely to follow unless the economy picks up. And no one expects that to happen at least until the second half of the year.

The reversion to higher gasoline/lower diesel prices is not expected to last, mainly due to demand for diesel in Western Europe, where diesel-powered automobiles currently account for 53% of new car sales. Refiners like Marathon Oil Company (NYSE:MRO) and Valero Energy Corporation (NYSE:VLO) are expanding their diesel capacities to meet the expected global demand.

Once diesel prices drop below gasoline prices, they are expected to stay there for a few months. US railroads and trucking companies, especially, are expected to get some relief from high diesel prices. But that condition is not expected to last beyond the beginning of the 2009-2010 heating season. Strong global demand for diesel will keep supplies of the fuel tight, and refiner margins up. Diesel fuel, not gasoline, is where the money is right now.

The fluctuating gas price observed in Fredericton:

Dec. 13, 2008. 70.9 cents/litre for regular gasoline.

Dec. 18, 2008. 73.9 cents/litre for regular gasoline; 88.4 cents/litre for diesel.

Jan. 3, 2009 (Saint John, NB). 65.9 cents/litre for regular gasoline. A record low in years!

Jan. 10, 2009. 73.9 cents/litre for regular gasoline.

Feb. 28, 2009. 77.5 cents/litre for regular gasoline.

As of today, the price of regular gas is 84.5 cents/litre in Fredericton.

Is it better to enjoy money that you earn now, or to save it for future use?

Do you know that interest earned from bank savings is considered part of your income? In other words, the sum of annual income (from a full-time position) and interest from savings, is the TOTAL income of an individual. This is taxable, based on the tax bracket it falls under. In a summary: the more you save up (and earn from savings interest), the more tax you pay. Does it mean that we should spend lavishly and enjoy life, instead of saving up and paying more tax?

There are ways to get around with this dilemma, fortunately. As a matter of fact, RRSP (Registered Retirement Savings Plan) in Canada allows a certain amount of savings (depending on annual income), in which the interest earned from savings or the profit from investments (stock market, bonds etc.), is non-taxable!! Savings in RRSP help to lower the tax bracket too. The downside of it? Withdrawal from these savings is made available only at the age of retirement. However, exceptions are given to a homeowner buying his/her first home, someone returning to school as a full-time student etc., and needs the access to savings. Some conditions apply under these circumstances. Having said that, savings from the RRSP are still accessible in case of emergency, subject to tax and possibility of losing the interests earned.

TFSA (Tax-Free Savings Account) is newly introduced by the Canadian goverment, as of January 1st, 2009. Individuals are allowed to deposit up to $5,000 per calendar year, and benefit from the tax-free priviledge on the interests earned. Withdrawal can be also be done at any given time. How wonderful is that? Furthermore, the remaining amount can be carried over to the following year, in the case where the $5,000 threshold is not met. For instance,  person A deposits $3,000 in 2009; he’s then eligible to deposit up to a maximum amount of $7,000 in 2010. TFSA, is certainly something worth considering.

Enjoy life now, and save for later, is probably the best thing to do ;)

The dismal worldwide economy crisis since last year is rather depressing; there’s no sign of recovery just yet.

The Bank of Canada made an announcement yesterday that the lending rate is slashed to a historic low of 1%. This may be good news to home buyers and the real estate industry; since the low mortgage rates boost refinance activity and therefore, helps the housing market. Nevertheless, negative impacts from the economy crisis such as fast-rising of living cost, high unemployment rate, and production shutdown in various industries, leave most people in the state of insecurity and fear.

Canada’s key interest 0f 0.75%, resulted from decision made by the Bank of Canada as of yesterday. The deep dive below the 1% benchmark has been predicted end of 2008. It’s known to be a 50-year low, and maybe dropping further. How pathetic… I joked with friends that we can now keep our savings in the backyard or under the bed just like the old days, since there’s not much we get out of bank interests nowadays :P

If you’re complaining about this, try observing other countries. For example, Japan offers an interest rate of 0.1%, and that of the United States is as low as a big fat zero. Australia and New Zealand, known to offer high interest rates, can’t escape from the fate of interest rate cut down either. Malaysia, on the other hand, has just recently announced a cut of 0.75% in key interest, down to 2.5%; which observed to be the largest cut in more than a decade.

Hopefully the recession will come to an end in the near future. Meanwhile, I’m grateful for the provision I’m blessed with, and continue to keep my fingers crossed for a promising future.