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Speculators blamed for new fuel hike

By Western Daily Press  |  Posted: January 26, 2013

Petrol pump

Petrol pump

Comments (24)

Oil speculators are being blamed for a fresh round of steep petrol price rises that are set to hit already struggling motorists in the West Country.

Rural communities that are finding life far more expensive than their urban counterparts are once more most likely to feel the worst of the price hike.

The forecast 4p per litre price increases have been blamed largely on City speculators, though retailers have been accused of failing to pass on recent price cuts to motorists.

Community watchdogs and charities have warned that the rise will push up the costs of agencies helping some of the most vulnerable, and put pressure on families already struggling to live on benefits.

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The rises are forecast by the Petrol Retailers Association which says wholesale prices have risen by five pence a litre since Christmas. And it warned that speculation by traders in the wholesale market could be responsible.

Brian Madderson, chairman of the PRA, said: “Independent retailers have been soaking up this increase at the expense of already tight margins because they know how hard the motorist is squeezed. But the floodgates will have to open soon.”

However the AA, which forecast a small rise of about 2.5 pence a litre, accused the industry of failing to pass on recent falls in wholesale prices to motorists as quickly as increases. It said retailers had failed to fully pass on a 2p fall in diesel wholesale costs in November and December, that with VAT were worth 2.5p at the pump. The association accepted the fact but said it was due to the “horrendous” summer.

ACRE (Action with Communities in Rural England) says inflation in rural areas is already twice the national average, with communities having to contend with higher prices for everyday goods and soaring fuel costs. The charity says families living and working in rural areas will be hardest hit by the Government’s plans to cap benefit increases. It is calling on the Government to consider the impact of benefit cuts on struggling rural families.

Last night, Justin Sargent, chief executive of Somerset Community Foundation, said the predicted fuel rises were “another premium on living in a rural area, which for the majority of people is a pleasant place, but for people on the lowest incomes, and the elderly on fixed incomes, the rise in cost is disproportionate.”

ACRE found weekly spending by rural households was £50 higher, with rural families far more likely to need to bear the costs of a car.

According to the Petrol Retail Association’s latest figures, petrol was selling for 132.83 pence a litre and diesel 140.4 pence.

The Office of Fair Trading will decide next week whether to launch an investigation in to the fuel market.

Edmund King, the AA’s president, said: “Another new year, another new round of pump price rises after the industry failed to pass on fully wholesale price savings.

“Wholesale petrol prices turned upward in the first week of January, average pump prices six days later. If falls in wholesale were reflected as quickly, no one would mind – but they’re not.”

Mr Madderson said: “We cannot explain to our customers why the wholesale price is going up so much – it is not due to Government tax, it is not due to Brent crude going up and it is not due to the weak currency exchange. So are traders, bankers or speculators taking British motorists for a ride?

“Motorists will understand that, in this winter weather, demand for petrol in this country has been at a low ebb. If there is no massive demand, why have wholesale costs been ramped up by nearly 5p a litre? We do not understand it – yet once again we are going to be accused of profiteering at the pumps when that is simply not true.”

He called on the OFT to launch an investigation in to the wholesale market.

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24 comments

  • bath1946  |  January 30 2013, 3:27PM

    In order to avoid short-term variations in cost due to currency fluctuations, because oil is transacted in dollars, most companies buy dollars forward according to their pattern of purchases. The result is that although they will know their future sterling liability, they do have to pay a premium. Also if the forward transactions assume a devaluation, it means that in the event of a sterling appreciation which has been experienced over the past few years, the companies cou;d face a triple cost, currency premium, sterling appreciation, and any increase in the dollar cost of oil. However, in the event of a devaluation the companies ought to be passing on the short-term benefits of buying forward, which they have not done. The reverse is true for net exporters. This is standard practice by importers/exporters and is not speculation, on the contrary it is a means of reducing risk. The actions of speculators whose transactions distort the commercial market are far more important than the balance of trade which reinforces the need to engage in matching payments/income with the sterling transaction, and although interest rates are often identified as an important cost component, because of todays' volatile currencies attention should be paid to taking professional advice.

  • mcupis  |  January 29 2013, 8:45PM
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  • Robert_H  |  January 29 2013, 3:03PM

    @ Zoomer- Thanks for bringing OPEC into the equation because looking at the various graphs we can observe a very steep rise in the price of crude following a steep decline which began from about 2008 which could have been the result of a fall in demand as would have been expected at a time of a world wide recession. However graphs for other commodities show a similar pattern and this to my mind suggests that speculators have rallied to make profits the only way they know how. How this works in practice I am not sure but I have gleaned from the practices of the gas and electricity companies, some of whom produce the product and then sold it on at an inflated rate to their own distributors who then pass this increase on to the customer. It is a little like the practice of creative accounting to legally avoid tax:its all in the paperwork. I realised from the beginning the less we buy,for whatever reason, the higher the price will rise simply because profits have to be maintained. In fact there is a program on Radio 4 tonight at 8:00 pm revealing how big business is helping the government to rewrite taxation laws to their advantage. No doubt what they are preparing will put the MPs claim that ''it was within the rules' in the shade. @ mcupis- Taxation is the next vital point and it is true that we are being taxed on tax as far as petrol and diesel goes which makes the introduction of the fuel escalator introduced by Gordon Brown even more contemptible. Even without this devious implementation the government would gain an increase of income from the tax that would naturally increase as the price of crude escalates. You may or may not know that Green Taxes have also recently been slipped in quietly by the present government and this is also now compounded by the increase in VAT to 20% . @ BrookWheelan and schris- Yep the knock on effect and the additional Vat hits everybody hard. Is it no wonder that MPs are seeking a substantial wage rise and others in a position to do so award themselves ever increasing bonuses year on year. @ matic_113- Your comment is spot on and it was a total nonsense that people felt rich because of the increase in value of their property and then taking a second mortgage on it. The only gainers are those that bought multiple properties a long time before the peak in the bubble. House inflation was bound to impact on the rental sector, after all, those renting are paying the landlords mortgage.

  • mcupis  |  January 29 2013, 8:25AM

    Of course, the greatest cost of fuel to the consumer, by far, is accounted for not by speculators or oil companies but by taxation. More than half the price is duty, and then you pay an additional 20 per cent VAT. I can't think of anything else that requires you to pay tax on the tax you have paid. It is worthwhile pointing out that this burden shot up under the last Government, and thst fuel would be 13p a litre more expensive now under Labour's plans. We have ageorge Osbourne to thank for not enacting these pre-planned increases.

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  • jezer  |  January 28 2013, 11:46PM

    Yes, but it means us older people can pay for our long term care from the sale of our houses, so relieving you youngsters from covering the costs. Is that not a good thing?

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  • matic_113  |  January 27 2013, 8:34PM

    @ Gazzabristol - great point the whole house price thing is a complete con. All (most) house prices rise together, the fact your house has risen in value is meaningless as you can't trade it in for a better one. All that happens is that we pay a higher mortgage for longer - less disposable income - lower living standards. I always laugh when you hear the government aiming to get house prices rising. House prices compared to income are far too high. lack of housing stock, low interest rates, poor quality and unattractive new stock are all to blame... needs a correction http://tinyurl.com/2u2fu3e

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  • Zoomer  |  January 27 2013, 1:34PM

    No contributor has yet mentioed OPEC. They, the cartel, manipulate the oil price to suit themselves and basically have a stranglehold on oil prices around the World. As fuel economy measures are introduced around the World with gas guzzlers becoming extinct. OPEC will simply " turn down " the oil taps, and increase the oil prices so their incomes are not reduced. You can't win really.

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  • BrookWhelan  |  January 27 2013, 11:54AM

    Hi 'schris', you're absolutely right - it affects almost every part of our lives, even for people who do not drive. It affects the haulage industry (who deliver our food), the emergency services, and the bus companies as they have to pay higher prices (and pass on the costs in higher fares). We're all affected by it, and I am particularly concerned about the impact on people in rural areas as they are the ones most dependent on using their cars. I have no idea how the wholesale petrol market works, but it does seem to me that it is fiendishly complex and needs a more simple structure to make it more transparent.

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  • SCHRIS  |  January 27 2013, 9:05AM

    You should get worked up because it effects other things like the price of food due to transport costs raising...

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  • jezer  |  January 26 2013, 6:55PM

    I can't understand why the price of fuel gets people so worked up. Is it the only thing that matters? Just get real and concentrate on the important things. Why not try cycling or walking for some of your journeys (not all I accept, but you get the picture). Just think of alternatives.

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