The last quarter has seen yet more turbulence in the retail fuels market with Brent crude prices behaving like equities and quickly falling from $117 to $97 during August.
The conventional notion from oil companies and wholesalers has been that there would be a three- to six-week lag before crude price changes impacted the retail market and that $5 a barrel might yield around 2ppl differential at the pumps.
Of course, the exchange rate is a crucial element too and sterling has also shown some volatility versus the dollar, the petro-currency, moving from the high for 2011 to date of over $1.67 at the end of April, down to $1.53 in mid summer and now strengthening back to nearly $1.66 again.
All this means it is nigh on impossible for retailers to judge where wholesale prices are heading. But this year, we have also had the added dimension of the ’big four’ hypers struggling with their own sales.
There has been yet more price competition on fuels as these retail juggernauts fight each other for shoppers. Sainsbury’s boss has admitted on radio that they have been using fuel as a ’loss leader’, with others like Tesco bringing out ever-bigger promotions such as the recent 15ppl discount. Then add in certain oil companies pricing on some of their own sites at levels below which their franchised independents can buy the same fuel, and it is proving to be a bloodbath for independents with sites in these ultra-competitive pricing areas.
Therefore we are talking to the government about taking measures to ensure that this important sector remains economically viable.
Since the Office of Fair Trading (OFT)disregarded the independents’ warnings and waved on the competition between hypers and oil companies with its ’Competition in the Supply of Petrol in the UK’ report in 1998, the industry has lost some 6,000 forecourts at an average close to 500 a year. The Competition Commission also found that there was no case to address the hypers’ price-busting promotions on fuel, so the independents have continued to struggle for sustainable volumes and margins with site closures unabated. In addition to discussions with the OFT, we are engaging with the Department of Energy & Climate Change to raise anew our concerns about unfair/predatory pricing.