Brian Madderson is continuing the RMI Petrol’s quest to better inform motorists about crude oil and fuel prices following an article in the business section of the Evening Standard yesterday.
The story, written by Anthony Hilton, claimed that “oil price has already fallen a long way – down 33% since May – and will eventually have to show through in lower prices at the pump”.
In a letter to the editor of the Evening Standard RMI Petrol chairman Madderson pointed out that brent crude hit a high of US$127/barrel at the end of April this year and yesterday was trading at $110, which is only a 13% fall. He added that pump prices in the UK are referenced by Platts, which produces a daily benchmark price in £/litre based on their market-on-close methodology.
“Therefore the dollar versus sterling exchange rate also has a significant and immediate impact because most independent petrol retailers have to buy from their wholesaler on a daily spot basis using a Platts plus formula,” said Madderson.
He also indicated that biofuels now make up 4% of the UK wholesale cost and these new fuels are not linked to global crude oil prices.
“For a number of reasons, including trades by hedge funds and other speculators, the wholesale prices this are showing greater volatility and less correlation to crude oil prices than analysts has expected,” Madderson stated in his letter. “Thus we may not see a full reflection of crude oil price reduction at the pumps in the lead up to the year end.”