Fuel prices are surging again – PRA’s Brian Madderson talks to IFCR about fuel prices, car washes, EVs and more

Brian Madderson has announced his retirement from the Petrol Retailers Association and Car Wash Association in the UK. As he prepares to take some well-earned R&R, he talks to IFCR about fuel prices, car washes, EVs and other key issues impacting forecourts.

Petrol prices have been creeping up since May – with the figures on 21st October on the GlobalPetrolPrices.com website showing Ireland at 1.594 euro per litre.

Meanwhile the PRA has just warned UK retailers that they expect the record pump prices of 142ppl for petrol and 148ppl for diesel set in April 2012 to be eclipsed before the end of October.

Fuel pricing trends are on the rise again: IFCR asked the PRA’s Brian Madderson – why?

“There are two main reasons,” he said. “The worldwide pandemic has caused new agreements between oil producers in Russia, Saudi and other OPEC countries to curtail the output of crude oil. This has had the effect of pushing up the price of Brent crude – putting it up to around $75 per barrel.

“The second reason is technical,” explained Brian. “European refineries are all having shorter production runs because a barrel of oil contains a wide variety of different products for different sectors – so demand for marine oil for shipping has taken a downturn, as has home heating oil – and the aviation industry is on its knees, resulting in oil companies limiting their output.

“Short production runs mean the amount of petrol being produced is limited. Companies then have to compete for short supplies – which in turn has pushed the wholesale price up.  I can’t see much change in that until towards the end of the year, when demand for heating oil goes up along with marine and aviation.”

Price wars

Brian doesn’t believe that this will lead to the type of price wars at the pump that we’ve seen in the past – involving the multiples.

“The multiples are fighting their own price wars with the discounters such as Aldi and Lidl – so because they are giving away their margins on grocery, it’s less financially economic for them to heavily discount fuel,” he said.

Between the price of crude, refineries reducing production and the budget – prices could hit the highs of 2012 – but as Brian explained “that’s not good for inflation.”

Car wash chaos in UK and NI

One of the most difficult issues Brian and the Car Wash Association have tackled in the recent past is the challenging differences in car wash regulations across the four jurisdictions of the UK throughout the pandemic – which impacted considerably on forecourts in Northern Ireland more than counterparts in the rest of Ireland, which did not have the same draconian restrictions.

“It was a significant disappointment that the Northern Ireland Assembly was the only one of the four UK countries that declined to make any change to restrictions on car washing. In England and Wales, they differentiated between automated and hand washes with the latter banned. The situation was much the same in Scotland, but included self-serve jet washes, rollover and conveyor washes. In the last few weeks of the restrictions England tried to ban the use of self serve jet washes – but it made no sense as everything else on the forecourt is self-serve – from ATMs, to fuel pumps and hot coffee – so why on earth did the Department of Health take this bizarre action?

“We need to make sure it doesn’t happen again,” said Brian. “They reversed the decision, with a new definition of automated car washes which excludes jet self-serve. What happened in England was that most local authorities ignored that – they were not interested in enforcing it.

“Northern Ireland was different. It didn’t allow any car washing – except for the inside of vans carrying food. We worked hard on this issue, enlisting the help of local MPs like Ian Paisley and others, we wrote copious letters to Ministers – but it was too difficult to get it changed. I am afraid that the Assembly was just too stubborn and obstinate – during the pandemic other sectors were hit by similar nonsensical restrictions, in my view imposed by the civil servants.”

Business rates

One area where the PRA did have a key success in its lobbying efforts was regarding business rates.

“We challenged the Northern Ireland Assembly and various departments over their decision not to allow shops on forecourts above 300 square metres to have the full rates holiday.

“All filling stations got the three months rates holiday from April to June 2020, then they got a further month in July – but after that only filling stations with shops up to 300 square metres could have the full 12 month rates holiday” said Brian.

“The PRA said that’s not fair – there is a big difference in Northern Ireland whereby for many people in rural areas, there is an absence of supermarkets. For large parts of the population they can only go to their local convenience store, generally on a forecourt. Land & Property Services agreed it should be 500 square metres and they put that to the first Minister who agreed to move it up to 500 sq mtrs. This meant that between at least 40 and 50 larger convenience stores were able to benefit and save hundreds of thousands of pounds by not needing to pay rates in that fiscal year 2020 to 21. That rates holiday is finished, now it’s back to the standard rate but it was a big benefit for many at the time – we got several letters of thanks including from Henderson Retail and others.

“That was entirely down to the PRA – we achieved that.”

Fuel quality and E10

On the 1st September in mainland UK the new, higher spec E10 containing up to 10% ethanol (helping to reduce carbon levels) became available on forecourts – but not in Northern Ireland or Ireland. Why?

“Northern Ireland is unable to introduce E10 yet because of blending capacity at terminals. It can’t be shipped in by sea, already blended, as ingressive water would contaminate the fuel – it has to be transported only across land,” explained Brian.

“We understand work is in hand to increase blending capacity at Northern Ireland’s terminals in Belfast and the one in Derry/Londonderry but it won’t be until the end of the second quarter in 2022 – so around another six months.

“In England, Scotland and Wales its obligatory from 1st September. One big concern is that there are a number of older vehicles and classic cars with engines not designed to be able to take fuel containing 10% ethanol – estimated at around 700,000 vehicles across the UK – plus classic cars which will have to use super unleaded (which remains E5). That commands a premium so these motorists will need to pay more.

“It may also affect smaller forecourts in Northern Ireland that only have two tanks – one for diesel and one for standard petrol. Owners will be likely to turn their petrol tank to E10 which means people who own older and classic cars will have to go where there is super unleaded available.”

The Irish government is considering following Britain’s lead in making E10 fuel the standard petrol blend at filling stations too.

(Britain joined the US, Australia and several European countries in making E10, a blend of fossil fuel and up to 10 per cent biofuel, the standard petrol from September 21, with Northern Ireland due to make the change early next year. The biofuel component of E10 is ethanol, a form of renewable energy that can be produced from agricultural feedstocks. The previous standard in the UK was E5, the current standard in Ireland).

PRA annual event

The PRA has just held its annual event in Northern Ireland at the Crowne Plaza, Shawsbridge, updating retailers, product suppliers, regulators and technical experts.

”It’s quite remarkable that during the pandemic the number of filling stations in Northern Ireland increased slightly – even company owned sites went up by 10% from 55 to over 60 sites – Go, Nicholl and Maxol have been opening new stations,” Brian says.

Electric Vehicles

What next for Electric Vehicles, IFCR asked Brian?

“Most of the large groups are waiting to see which way the technology runs on this one – demand is currently very low – but there will be rapid changes. Currently the cost of installing an EV charger on site can be as much a quarter of a million pounds – that’s a huge investment, with maybe only a few customers using it each day.

“We will see a slow increase, but it will take a long time to make a return on your investment.

“There is also range anxiety and charge point anxiety.

Hybrids

“There are two types of hybrid – one which you charge and needs a power point, the other is self-charging – which runs on petrol. If you live in a big city a hybrid or EV may suit – it may be a second or third family car used for regular short journeys. At the minute, we are not recommending investment in charging points to members without offering words of caution.”

Hydrogen strategy

Recently the PRA welcomed the UK government’s hydrogen strategy.

“Hydrogen is taking off in Asia in countries such as Japan and South Korea and in Europe for Scandinavia and Germany. Motor manufacturers are slowly including hydrogen models and going further with it – so if I was a betting man, I’d say in ten or fifteen years hydrogen will be the way to go. I would advise our members, rather than investing in EV infrastructure right now, to invest in car washing facilities for a quicker and more certain return. Hand car washes have had their day. If a  hand car wash is properly regulated, and pays living wages and there’s no labour abuse, then their costs will go up considerably.

“Whether a motorist is driving a hydrogen, EV or fossil fuelled car, they will need cleaning. Modern high quality automated car washes are becoming hugely popular again, and I would say, that’s where the wise fuel retailer should be investing.”