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Higher oil prices in the UK push petrol up 26% in one year
Published on November 17, 2009 by oilprices · 1 CommentUK petrol prices are set to soar past 110p a litre £5 (around $8.50) a gallon in the run up to Christmas as higher oil prices have seen oil companies cash in. It will be the highest since September 2008 and a rise of 26% since the start of this year.
Motorists will suffer further misery in the New Year when the Government reverses it’s 2.5% reduction in VAT. Experts blame the continuing rise in forecourt prices on speculators, who are stockpiling massive amounts of oil.
The effects of the rises could spread throughout the economy. Families will be left with less to spend in the shops, and some may have to rethink plans to travel to see relatives and friends. Shop prices themselves are often linked to the cost of petrol.
There was a blow for rail travellers, too, yesterday. Train companies announced New Year fare increases which unions said could mean rises of up to 15% on most cheap day returns and long-distance open tickets.
The last time petrol prices were so high the price of a barrel of oil was $100. Yesterday it had fallen to just below $80.
Experts say tax rises and the falling value of sterling have helped fuel the price increases. Motoring groups say the oil giants also have questions to answer. BP recently revealed bumper profits of more than £1bn a month – a 60% rise on the £1.9bn profit it made between April and June.
The consumer website petrolprices.com has calculated that the cost of filling up an average family car with unleaded fuel will be £60.50 this December – £12.15 more than a year ago.
AA spokesman Luke Bosdet said: “To the average driver, this is madness. Why are prices in an oil glut not falling rather than soaring to levels never seen before at this time of year?”
“We’ve got massive surpluses of oil, but it is being stockpiled at near-record levels to keep the price up. It is speculators and spivs on the stock market as well as the Government who are keeping prices high. The oil companies are profiting from the high price, but the motorist is losing out. With less money in their pockets this Christmas, they will spend less at the shops and businesses will suffer.”
RAC spokesman John Franklin said: “The festive season is traditionally a very expensive time and this has been made worse by petrol prices rising by around 26 per cent from last year. With the £5-a-gallon mark expected to be hit before Christmas, many families are likely to think twice about visiting family and friends.”
Motoring groups have accused oil companies of being quick to raise prices when the cost of crude oil rises and slow to lower them when it falls. Mr Franklin added: ‘It’s about time oil companies became more transparent with their pricing so that motorists can clearly understand why these price rises happen.
Tags: oil companies, oil prices, petrol, prices, UK
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Stockpiling IS NOT causing the hikes. Figures published show that, even with the U.S. looking to increase its reserves from 770 million to 1 billion barrels and China pushing up past 330 million barrels alongside Europe, Japan and other nations , the total reserve is only some 2.6 percent of total production. Private speculation is estimated at 3 times this. This only adds up to 10% approx of world derived production. With Barrel prices of crude looking to possibly double from $60 less than 12 months ago the figures for stockpiling don’t add up.
Oil is still traded against the dollar which is very weak, but is also the major reserve currency of much of the financial world. It is in a sense about volume, but not in storage terms. It’s all about volume trade which is why the price is moving up slowly.
Holding oil prices higher in percentage terms decreases demand due to pump price as people cut back. As a tax derivative lower demand causes corresponding central fiscal returns to diminish, though with the tax take in the UK only represented as £5Billion GBP the rises are fairly insignifcant to leave room for accusations of profiteering.
Particularly insignificant when UK debt is nearly a trillion pounds from Bank bailouts, quantitve easing, and the previous year’s fiscal debt of nearly £400Billion pounds. Stockpiling is merely counter-acting the decrease in demand to date due to consumers own fiscal tightening.
The real key to the current Barrel price of oil is as a trading revenue for Banks to recover some of their losses. It is nothing to do with stockpiling but once again everything to do with leveraging in the market.
In the Nineties and early noughts to 2008 Property was the key to profitable speculation, since that market has collapsed banks have to find an alternative to keep speculators (customers) happy and their own balance sheets and city high fliers well renumerated. Oil – since it is still the primary source of industrial energy and consumer energy – is the key.
No other commodity can be manipulated for return the way oil can and, with futures and spread markets also badly hit by property, going long on oil is going to provide a strong return for investors. Oil prices will relax when the property market and the dollar, has properly recovered.
This aslo explains the recent trade surge in Gold. Again listed against the dollar which is weak. So more gold (and oil) for your buck. It’s basic economics when all is said and done. Feeling hard done to? Get used to it. This is the price you pay for Free Markets.
The other acid-test for present pricing assurance is seen by credit interest rates, which despite base rates at an all time low, they remain high and will continue to be so. If credit repayment relaxed then consumers will have more money to spend, this in turn will probably impact on oil one way or another as the oil producers increase production to meet a surge in demand. this in turn will cause the price to drop, perhaps sharply.
Most of the property portfolio values which were wiped out when Lehmans collapsed and banks were bailed over had massive amounts of funds giving promises to investors. The property still exists and although commanding a lower value still can, in the right market give promising returns. Banks know this, however in the meantime they have to keep their high-spending investors as customers and more importantly provide returns so they can continue to realise their wealth for future business.
Banks have to do this as state ownership carries severe financial and operational penalties. City bonuses mean more than people realise. Markets have long known that they have the capacity to manipulate the world for far greater gain than any political framework can ever hope to attain.
On the plus side. They have finally realised that you can only leverage a good thing so far. Hopefully they will accept that in the course of where the future price of oil is steered.
NB. Saudi Arabia the biggest producer has already commented that if Oil prices keep increasing it will look to increase production to control prices. High energy costs cause higher manufacturing overheads. Saudi Arabia is in essence the head of the middle east and since all the middle east trades almost everything against it’s oil production, it needs to ensure price control across a vast range of consumer items.
If the market gets it wrong this time, at least we wont have to worry about the taxpayer footing the bill.
Of course the real answer is to take Oil off the markets altogether and let governments fix prices with the producer directly. Why pay for a middleman anyway?