Fuel prices on the rise? Here’s the reasons why
Fuel prices on the rise again? Here’s why…
Petrol prices have been creeping up since May – with the figures on 30th August 2021 on the GlobalPetrolPrices.com website showing Ireland at 1.546 euro per litre (5.852 per gallon).
IFCR asked Brian Madderson, CEO of the Petrol Retailers Association in the UK why petrol and diesel prices are creeping up again. He explained that there are two main reasons.
“There are two main reasons,” he said. “The worldwide pandemic has caused new agreements between oil producers in Saudi, Russia and other OPEC countries to curtail the output of crude oil. This has 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.
Shorter production runs
“Short production runs mean the amount of petrol being produced is limited. Companies then have to compete – which has pushed the wholesale price up as well as crude oil costs. I can’t see much change in that until the end of the year, when demand for heating oil goes up along with marine and aviation.
“On Wednesday 1st September 2021 fuel prices stood at (on average) 135.4p per litre for unleaded and 136.7p for diesel in the UK – the highest since the ‘big peak’ of April 2012 when fuel price per litre hit an all time high of 142p per litre for unleaded and 148p per litre for diesel. However with the UK autumn budget coming up, there may also be more tax slapped on fuel – that won’t be good for inflation.”
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.
Brian believes we could see prices creep up further in the coming weeks and months – he doesn’t predict it will hit the highs of 2012.