The price of refueling an average family car with petrol exceeded £ 100 on a day that was described as a ‘really dark’ day for drivers on Thursday. Many factors combine to make the British face pain in the pumps.
Why are fuel prices so high?
The average price of gasoline is now 182.3 liters, while diesel reached 188.1 pence on Wednesday. Some front yards already sell petrol for more than £ 2 a liter. Fuel prices have risen this year as the price of crude oil used to make petrol and diesel has jumped.
Crude oil prices plummeted during the pandemic as travel restrictions boosted demand. This search returned when the world returned to motion. Russia’s invasion of Ukraine has exacerbated the situation as various Western countries avoid Russian oil. The fall in the value of the pound against the dollar over the past 12 months has also increased wholesale costs for petrol traders in the UK.
Who is to blame?
Finger targeting has begun as consumers, who are already struggling with rising energy and food bills, face rising pump prices. The government has accused some fuel retailers of profiteering and failing to comply with the March 5-pound reduction in fuel tariffs. Retailers, for their part, blame rising wholesale costs.
Howard Cox, the founder of the FairFuelUK campaign, accused oil refineries of failing to bear the drop in crude oil prices from the top during the first days of the war in Ukraine. “Refineries are overwhelmed with money and take big margins,” Cox said.
Car groups even pitted themselves against each other – AA accused the “reckless” intimidation of the RAC to fuel further price increases. The RAC denied this and called for a reduction in the duty on fuel or VAT.
Why do fuel prices rise when oil prices have fallen?
The price of oil fell from a high of about $ 140 a barrel at the start of the invasion to about $ 120 as nations sought supplies from alternative countries to Russia. However, retail fuel prices did not follow suit. Wholesale and retail prices usually move in tandem, but refineries seem to be shrinking more.
Refining margins are calculated using crack spreads – the total difference in price between a barrel of crude oil and refined petroleum products. The U.S. Energy Information Administration said declining refining capacity in Europe and the east coast of America, as well as increased consumer demand, have increased spreads.
Are there enough oil refineries?
Western oil refineries have been experiencing difficulties in recent years. The drop in oil prices due to Covid has hurt the industry, which is struggling to attract investment in facilities amid heightened environmental regulation and concerns about peak oil demand. Many of the refineries supplying Europe are based in Russia, while Beijing closely controls how many Chinese refineries export.
There are six large refineries in the United Kingdom. There were concerns about the finances of Essar Oil, the company behind the Stanlow refinery, as unions called for a meeting with Scottish Prime Minister Nicholas Sturgeon amid uncertainty about Grangemouth’s future. In theory, the boom in refining demand should have helped them, although the rise in oil prices in March will inflate their investment costs.
Did retailers accept the reduction in fuel tariffs?
The Competition Authority is investigating the matter and threatens to launch a formal investigation if it finds evidence that the reduction has not been passed on to consumers. The government said it had seen evidence that front yards within the same retail chain offered different prices in different parts of the country.
Industry sources say wholesale prices have risen so sharply that Chancellor Rishi Sunak’s benefits from reducing fuel tariffs have been quickly erased.
How does the UK fuel duty compare to Europe?
The duty on fuel in the United Kingdom is 52.95 liters for petrol and diesel after cutting. In the EU, countries impose a minimum excise duty of 0.36 euros (31 pence) per liter, although only Bulgaria and Hungary adhere to this. The Netherlands has the highest fuel tax in the EU – 0.81 euros per liter, according to the Tax Foundation, a US think tank.
Can we expect even higher fuel prices?
Yes. As the northern hemisphere enters its “driving season” – as holidaymakers prepare to hit the road – there is little sign that demand will slow. Gordon Ballmer, executive director of the Gasoline Retailers Association, said wholesale costs continued to rise and its members could not afford to sell at a loss.
He told Sky News: “Many of our members know their customers personally, come regularly and know the pressure on household budgets. Unfortunately, we buy in bulk and we have to profit from it. They are facts of life, unfortunately. “
Goldman Sachs believes oil prices could return to $ 140 this summer, suggesting wholesale prices will remain high.
Add Comment