RMIP’s fuel price monitoring system, Big Oil, has seen the steepest and fastest-ever rise in wholesale costs over the festive period. From Monday 19 December to Thursday 5 January the cost of diesel increased by nearly 4.50ppl and unleaded petrol by as much as 5.00ppl with 20% VAT to be added.
RMI Petrol fears that average UK prices for diesel, currently close to 141ppl, will soon push past the May 9 peak of 143ppl and hit new record levels - perhaps even breaching 145ppl in the next few weeks. These increases have been so rapid that fuel retailers have had scant time to react over the holidays and few have made any significant increase yet to their pump prices. However, from this weekend prices will have to move upwards quickly in order to protect the already wafer-thin margins which have caused the independent retailers such financial stress through 2011.
Movements in £sterling were not significant against the US$ over the holiday period but RMIP said the following market drivers have caused prices to suddenly shoot up:
* Growing tension between Iran and the western world over their nuclear intentions with the EU trying to force an embargo on crude oil supplies and Iran responding by threatening to blockade the Straits of Hormuz through which 30 to 40% of the world’s oil supply is shipped.
* Worries over EU refinery activity and specifically diesel capacity after Petroplus Holdings are forced to shut down 3 out of 5 plants due to banks freezing US$1.0bn of the company’s loans, cutting crude oil supplies.
* Also Repsol, Spain’s largest oil company, has halted production this week at its Petronor refinery near Bilbao because of weakening profit margins.
* Cash flow strains from high pricing forces companies to balance their end of year positions and cut stocks to very low levels.
Brian Madderson, chairman of RMI Petrol commented: “This is a very worrying development but not entirely unexpected. I wrote to the Chancellor on January 2 highlighting the serious supply issues ahead and enclosing a report ‘The case for reform of fuel taxation’ as it is the Government’s only direct control over rocketing fuel prices which are undermining society and our economic recovery.”