The cost of refilling an average family car with petrol has exceeded £ 100 in what has been described as a “truly dark” day for drivers on Thursday. A multitude of factors have been combined to make the British face the pain in the bombs.
Why are fuel prices so high?
The average cost of gasoline is now 182.3 per liter, while diesel reached 188.1 pence on Wednesday. Some yards already sell petrol for over £ 2 a liter. Fuel prices have risen this year as the cost of crude oil, used to produce petrol and diesel, has risen.
The price of crude oil collapsed during the pandemic as travel restrictions punctured demand. This demand has returned as the world moves again. The Russian invasion of Ukraine has aggravated the situation, as several Western countries are avoiding Russian oil. The fall in the value of the pound against the dollar over the past 12 months has also pushed up wholesale costs for petrol retailers in the UK.
Who is to blame?
The finger has started when consumers, who are already struggling with rising energy and food bills, are facing rising prices at the pump. The government has accused some fuel retailers of taking advantage and not approving the 5 per cent cut. March on fuel tax. Retailers, in turn, have blamed the rise in wholesale costs.
Howard Cox, the founder of the FairFuelUK campaign, blamed oil refineries for failing to pass on the fall in crude oil prices since the highs of the first days of the war in Ukraine. “The refineries are full of cash and have big margins,” Cox said.
Motor racing groups have even turned around: the AA has accused the RAC of “reckless” scare of fueling further price hikes. The RAC has denied this and has called for a reduction in fuel tax or VAT.
Why do fuel prices rise when oil prices fall?
The price of oil has dropped from a high of about $ 140 a barrel at the start of the invasion to about $ 120, as nations have sought supplies from alternative countries in Russia. However, retail fuel prices have not remained the same. Normally, wholesale and retail prices are moving at the same time, but refineries seem to be making a bigger cut.
Refining margins are calculated using crack spreads, the overall price difference between a barrel of crude oil and petroleum products. The U.S. Energy Information Administration said a decline in refining capacity in Europe and the east coast of America, as well as rising consumer demand, has widened differentials.
Are there enough oil refineries?
Western oil refineries have been in trouble in recent years. The fall in oil prices due to Covid has hurt an industry that has struggled to attract investment to facilities amid rising environmental regulation and concerns about peak oil demand. Many of the refineries that supply Europe are based in Russia, while Beijing closely monitors the amount of exports from Chinese refineries.
In the UK, there are six major refineries. There have been concerns about the finances of Essar Oil, the company behind the Stanlow refinery, while unions have called for a meeting with Scottish Prime Minister Nicola Sturgeon amid uncertainty over the future of Grangemouth. In theory, the rise in refining demand should have helped them, although the rise in oil prices in March will have inflated their input costs.
Have retailers passed on the fuel tax reduction?
The Competition and Markets Authority is investigating the matter and has threatened to initiate a formal investigation if it finds evidence that the cut is not being passed on to consumers. The government has said it has seen evidence that car parks in the same retail chain offer different prices in different parts of the country.
Industry sources argue that wholesale prices have risen so sharply that the benefits of Chancellor Rishi Sunak’s fuel tax reduction were quickly wiped out.
How does the UK fuel tax compare to Europe?
The UK duty on fuel is 52.95 pa per liter for petrol and diesel after the cut. In the EU, countries impose a minimum excise tax of € 0.36 (31 pence) per liter, although only Bulgaria and Hungary adhere to it. The Netherlands has the highest fuel rate in the EU, at 0.81 euros per liter, according to the Tax Foundation, a US think tank.
Can we expect fuel prices to rise further?
Yes. With the arrival of the northern hemisphere in the “driving season,” as holidaymakers prepare to hit the roads, there are few signs that demand will slow down. Gordon Balmer, executive director of the Petroleum 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 clients personally, come in regularly and know the pressures this puts on family budgets. Unfortunately, we buy in bulk and have to make money. They are made of life, unfortunately. “
Goldman Sachs believes oil prices could return to $ 140 this summer, suggesting wholesale prices will remain high.