I am sure like many others I have watched with concern at the seemingly endless increase in the cost of fuel at the pumps.
It is easy to point the finger at individuals profiteering or the Government choosing to bail out ailing banks rather than help out its hard pressed tax payers.
At the height of this fiasco prices rose to $100 a barrel and were blamed for the almost daily increase per litre. Since those heady days prices have dropped to $86 a barrel but I have yet to see any reduction per litre.
Predictions of when and if we can look forward to lower prices
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My personal opinion is, cynic that I am, that now the psychological barrier of the £1 litre has been breached the next time you refuel for less than £1 a litre you will probably be filling up your squadron of flying pigs.
The basis for my thinking is that most chains kept their prices below the magic £1 mark seemingly against strong upward oil prices for some time, almost as if they were fearing a backlash when the trigger was reached, thus they probably squeezed their margins hard. Now the genie is out of the bottle they will probably keep it there to claw back some extra profit to repair their margins, in the meantime the oil price and the increase in duty planned for April will be sufficient to prevent it dropping back below £1 once the margins have improved. As some justification for this I would point to the fact that once the £1 was broken prices very rapidly, within a couple of weeks, and without great fuss, reached the 110-115 range before falling back to around 102, at least locally, in the last week or two.
Of course this is my personal opinion as a cynic and would, on this occasion, love to be proved wrong.
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One of the odd things about this rise in fuel prices was that it coincided with the £ hitting its highest level against the $ which should surely mean that oil was cheaper at £1=$2 and $100 a barrel than (say) £1 = $1.5 and oil at (say) $75 a barrel?
Or am I barking up the wrong tree? (or just barking!)
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Spanish prices for diesel, which seem to move in parallel with UK prices on a euro-for-pound basis, have dropped in the past week from approx. 1.09e to 1.04e
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In the last 6 weeks, oil has gone from $90 per barrel to $100 and back to $87. Nearly $89 tonight.
You want price stability?
? Wish away.
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The international price of oil is only a very small part of pump cost of fuel. Strip out taxation, retailing cost, distribution cost, refining cost, exploration cost and profits then the variation in cost of crude has lttle effect on pump prices.
The fact that retailers will increase pump price when oil rises are reported but not reduce them when decreases occur is part of supply-and-demand psychology.
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The international price of oil is only a very small part of pump cost of fuel. Strip out taxation retailing cost distribution cost refining cost exploration cost and profits then the variation in cost of crude has lttle effect on pump prices. The fact that retailers will increase pump price when oil rises are reported but not reduce them when decreases occur is part of supply-and-demand psychology.
A (42 US gallon) barrel of oil produces 19.6 gallons of petrol, 10 gallons of diesel, 4 gallons kerosene, 1.7 gallons LPG, 1.7 gallons heavy fuel oil, and 7.6 gallons of other products.
If one disregards thse last two (10 gallons of product), and treat US$100 as producing 35 US gallons of useful fuel, that's $2.86/gallon, or $0.75/litre - £0.38/litre.
So a $20 increase in oil prices raises price by about 8p. And if oil fell back to US$20/barrel, prices would fall by about 31p.
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which should surely mean that oil was cheaper at £1=$2 and $100 a barrel than (say) £1 >> = $1.5 and oil at (say) $75 a barrel? Or am I barking up the wrong tree? (or just barking!)
I don't think oil has ever been $75 while the x/r has been at $1.50 - it's a good few yrs since we had x/r like that, but oil at $75 is a pretty recent thing.
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All I know about the cost of fuel production is that I regularly fill up in the Middle East in countries where of course 90% of the GNP is oil/ gas and the price per litre for petrol is equivalent to 11p.
If they can sell for that price and make a profit ( and its not self service) , then the cost of production has to be less. But the price is set by supply and demand and the weakness of the dollar does not help.
The cost of production in the Gulf is still high ( including my company helicopters at @ $6000 per hour -out of their loose change - : 0))
What we are paying for in addition is the cost of getting the fuel to the UK and tax, tax and more tax.
It is apparent to me that you cannot be selling just petrol on a forecourt and make a profit these days and as a result the supermarkets use their forecourts as loss leaders and four out of the six garages which were in my home town four years ago have become blocks of flats.
Who knows where it will end but its sure as hell the prices are not going to come down...
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