Why are fuel prices so high?
The average cost of gasoline is now 182.3 liters, while diesel reached 188.1 p.m. on Wednesday. Some courtyards already sell gasoline for more than λί 2 a liter. Fuel prices have risen this year as the cost of crude oil, which is used to make gasoline and diesel, has soared. The price of crude oil collapsed during the pandemic as travel restrictions pushed demand. This demand has returned as the world is back in motion. Russia’s invasion of Ukraine has worsened 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 pushed up wholesale costs for petrol retailers in the UK.
Who is to blame?
The finger has started as consumers, already struggling with rising energy and food bills, face rising pump prices. The government has accused some fuel retailers of speculation and failing to pass the March 5 point reduction in fuel tax. Retailers in turn blamed the increase in wholesale costs. Howard Cox, the founder of the FairFuelUK campaign, accused the refineries of failing to transmit the fall in the price of crude oil from the highs during the first days of the war in Ukraine. “The refineries are full of cash and have a high profit margin,” Cox said. Automotive teams have even turned their backs on each other – AA has blamed RAC “reckless” terrorism for fueling further price increases. The RAC denied this and demanded a reduction in fuel tax 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 beginning of the invasion to about $ 120 as nations sought supplies from alternative countries in Russia. However, retail fuel prices did not follow suit. Wholesale and retail prices usually fluctuate at the same time, but refineries seem to be declining more. Refining margins are calculated using “spray crack” – the total price difference between a barrel of crude oil and the oil products refined from it. The U.S. Energy Information Administration says declining refining capacity in Europe and the east coast of the United States, as well as rising consumer demand, have pushed the spreads.
Are there enough oil refineries?
Western oil refineries have been struggling in recent years. The fall in the price of oil due to Covid hit an industry that struggled to attract investment in facilities amid growing environmental regulations and concerns about the peak of oil demand. Many of Europe’s refineries are based in Russia, with Beijing closely monitoring how many Chinese refineries it exports. In the United Kingdom, there are six major refineries. There have been concerns about the finances of Essar Oil, the company behind the Stanlow refinery, and unions have called for a meeting with Scottish Prime Minister Nicola Sturgeon amid uncertainty over Grangemouth’s future. Theoretically, the explosion in refining demand should have helped them, although the rise in oil prices in March would have pushed up their input costs.
Have retailers gone through the fuel duty reduction?
The Competition and Purchasing Authority is investigating the matter and has threatened to launch a formal investigation if it finds evidence that the cut is not being passed on to consumers. The government said it had seen evidence that stadiums within the same retail chain were offering different prices in different parts of the country. Industry sources claim that wholesale prices have risen so sharply that the benefits of reducing fuel tariffs by Chancellor Rishi Sunak have quickly disappeared.
How does the UK fuel tax compare to Europe?
The fuel tax in the UK is 52.95 liters per liter for petrol and diesel after the cut. In the EU, countries impose a minimum excise duty of 0.36 euros per liter, although only Bulgaria and Hungary insist on it. The Netherlands has the highest fuel injection in the EU, at 0.81 euros per liter, according to the Tax Foundation, a US think tank.
Can we expect further increases in fuel prices?
Yes. With the northern hemisphere entering the “driving season” – as holidaymakers prepare to take to the streets – there are few signs that demand will slow. Gordon Ballmer, executive director of the Gasoline Retailers Association, said wholesale costs continue to rise and its members cannot afford to sell at a loss. He told Sky News: “Many of our members know their customers personally, they come on a regular basis and they know the pressures this puts on household budgets. Unfortunately, we buy on a wholesale basis and we have to make money from it. “These are the facts of life, unfortunately.” Goldman Sachs believes oil prices could return to $ 140 this summer, suggesting that wholesale prices will remain bullish.
