You’ve read the headlines: ’Fuel sales plummet by 500 million litres’ and the like, based on figures from the Department of Energy and Climate Change (DECC). Naturally these headlines have prompted the inevitable cries of doom from the usual suspects, to the effect that it’s all down to fuel pricing in general and fuel duty in particular, and Something Must Be Done!
The key elements of the story that has featured so prominently in the media are that petrol sales were ’10.6% down’ in the second quarter of this year compared to the first quarter, and if that wasn’t a sure sign of the impending apocalypse, then think about the ’two billion litre’ fall in the first half of 2012 compared to the equivalent period in 2008. So far, so confusing. Then follow some attempted explanations for these figures: more fuel-efficient vehicles (since last year or since 2008?); bad weather (pick a recent year without any?); and the complete disruption of the retail fuel market in March and April of this year (due to the tanker drivers’ strike that never was) only to be rejected of course, which leaves us with the obvious ’cause’ (fuel pricing) and the even more obvious ’solution’ reduce the duty on fuels. Case proven.
Now since we’ve been highlighting for years in these pages the damage that rising fuel prices inflict on the retail petroleum sector, it may seem a bit perverse to quibble about the accuracy of a story that seems to support our case, but really, there are times when a bit of objectivity is called for. Given the hype in which the DECC’s figures have been spun, this is such a time, so let’s quibble.
The particular set of figures which seem to have prompted this story were released by DECC on September 27. You may be interested to note that the figures do not show ’litres’ but are actually in ’thousands of tonnes’. You’ll have to do your own conversion.
Yes, those DECC figures do indeed show that ’motor spirit’ demand in Q2 2012 at 3,193 thousand tonnes was 10.6% down compared to Q2 2011, as heavily featured in the subsequent stories and comment.
BUT, the same figures also show that demand for DERV fuel in Q2 2012 at 5,196 thousand tonnes was only 1.6% down compared to the same period a year earlier and few, if any, of the subsequent commentators seems to have mentioned the DERV statistic.
Now the last time we looked, duty and VAT rates on diesel were identical to those on petrol. Presumably therefore both fuels would show similar declines if those taxes were directly relevant to aggregate demand.
Why is the large drop in petrol demand worthy of so much speculation while the apparently steady demand for diesel is not even mentioned? According to the Society of Motor Manufacturers and Traders, sales of diesel-powered cars up to September 2012 accounted for over half (50.4%) of all new car registrations.
Demand for aviation turbine fuel in Q2 2012 was also 6.8% down on a year earlier. While that may be irrelevant to the arguments about road fuel prices, it may suggest that air transport was suffering from some of the other factors that also affect road transport such as the weather, or perhaps the recession?
Overall petroleum demand at 16,519 thousand tonnes in Q2 2012 was down by 5.1% on Q2 2011. But comparing overall petroleum demand for the first half of 2012 (33,688 thousand tonnes) against the first half of 2011 (34,667) the fall is only 2.8% perhaps not quite so worth writing home (or blogging) about. Now let’s take a look at 2008, which some commentators have chosen as a base year for comparison. Petrol demand in the first half of 2008 was 38,618 thousand tonnes, so demand in the first half of 2012 was 12.8% below that.
hype and spin
So what we end up with is really a non-story hyped and spun in whatever direction suits various lobby groups. Yes, the ’official figures’ for fuel demand in Q2 of this year are a bit ’odd’ but once you take into account various factors, what you’re left with is a picture of the economic recession that started in 2008 and is affecting virtually all of the industrialised world.
By all means let’s agree that consumers are suffering from falling real incomes with rising prices of essentials like food and fuel leaving them little choice but to cut down on spending. That will eventually have an impact on fuel volumes. Let’s also agree that almost everyone in this industry is suffering from the particular effects of fuel pricing and taxation on their cash flow and profitability.
However, here we see a media story based on very selective use of statistics, which really doesn’t stand up to much critical analysis.
Buried on page 12 of the same DECC press release is one line that bears reproduction in whole: "In August 2012, the UK retail price for petrol was ranked sixth highest in the EU. UK diesel prices were the highest in the EU". Now if someone could explain that, then there’d really be a story.