Tuesday, August 11, 2015
Have you say in the largest ever survey of UK driver opinionWe could be at the breaking dawn of an era of cheap fuel. OPEC’s risky gamble of wiping out the U.S fracking industry by over-supply and unsupported prices looks like its backfired, badly. The Saudi’s got their timing wrong. They couldn’t have predicted that the US economy would rebound so strongly and that Asian demand for oil would fall so significantly. OPEC put themselves between a rock and a hard place and couldn’t raise prices for fear of losing Chinese market share and so far the U.S shale industry is surviving the enforced price war by cutting costs by up to 50% and drilling even deeper. The new 18,000 ft. Texas Permian Basin (drilled in just 16 days) could produce 5-6 million barrels a day – that’s half the Saudi’s daily output from a single field. America’s is now pumping the highest amount of oil for 43 years and has broken the market control OPEC has held since the Seventies. Fracking isn’t going to go away because new technology will reduce extraction costs, feasible reserves will increase and oil prices will find a natural market level.  And I don’t believe we’re there yet.

That’s why last week Shell has said it’s preparing for a ‘prolonged downturn’ in crude prices while oil majors across the globe cut both investment and jobs to buffer themselves against the effects of a 50% fall in crude prices. But the falls aren’t going to stop because a new dialogue with Iran and possible lifting of sanctions means the oil oversupply situation that’s pushed crude to record lows will continue with more pressure on crude benchmark prices. Some analysts are even saying that Brent Crude could fall to as low as $35 next year.  For UK drivers that could mean that petrol and diesel could slip below the magic £1.00 threshold – something we’ve not seen for decades – which will lower interest rates, reduce inflation and raise GDP.  The balance of power in the Middle East may shift with global repercussions that may eventually concern us all, but in the short to medium term oil, like many other commodities, will continue its downward price spiral. There’s just too much supply and not enough demand.

Have your say in the largest survey of UK driver opinion
But this historic shift in the price metric of hydrocarbons has caused serious damage to Russian, Malaysian and Venezuelan economies and news that Saudi Arabia has just announced that its going to raise $27 billion from bond sales is further proof that the strain might be starting to show. U.S shale production is stronger and more resilient that previously thought. This game of chicken between the US and the Saudis can’t continue and someone has to blink first but the oil kingdom shows no signs of abandoning their price war and is pumping more oil than ever. Experts say that if they do start reducing supply to bolster prices it may be too late because the risk of losing market share to other global producers desperate for petroleum dollars is now too high. The geopolitical consequences of all this are not good at all. Vladimir Putin is trying to distract Russian citizens from an economic collapse by aggressive militarism and if the Saudis can’t afford to keep social unrest contained then Isis, Iran and religious fundamentalism will gain more ground across the Middle East. Oil, as we’ve always known, can influence global and political boundaries and is the catalyst for war. And when those boundaries start to shift uneasily, we need to worry. So in the short term enjoy the era of cheap fuel – because it’s coming – but in the long term the effects of this phoney war may be far more serious than anybody dared dreamed of. Be careful what you wish for.     

Quentin Willson  
Help us to help you for a better deal for UK's Drivers and have your say in the largest ever survey of Uk driver opnion FairFuelUK

Please donate to help the fight for lower fuel prices and a better deal for drivers

Share this Post:    


[ posted by Rob Barber, 11.08.15 14:36 ]

What do you mean we've not seen this for decades? It was below £1 in 2007. That's less than a decade


[ posted by Yvonne staple, 12.08.15 10:00 ]

The low oil prices should be passed on to the consumer, they are quick enough to pass on the inflated prices.


[ posted by Bob Thomas, 12.08.15 22:46 ]

The price of fuel may come down , but the Government will hike up the tax, the motorist won't see the benefit.


[ posted by Steven Toy, 13.08.15 12:22 ]

The last time fuel prices dipped below £1 at the pumps was 2009 following the spike in 2008.


[ posted by Adam Wilson, 16.08.15 11:04 ]

Interesting piece, I am intrigued to see how the price/supply war between Saudi Arabia and the USA pans out. However, surely the conclusion of the article indicates that petrol prices reductions should be achieved (at least in part) by governments' reductions in duty, rather than seemingly destabilising attempts by the producers to push down the base price of oil?


[ posted by Dale, 16.08.15 17:14 ]

the base price of fuel fluctuates but we never see any drops at all, we only ever see the rises. Oil costs 100 dollars a barrel, we see a rise, it drops to 80 dollars, no change in fuel prices for us. It goes up to 90 dollars and we see another rise in fuel prices. However, oil still costs less than the first time when it was 100 dollars, that second rise should never have happened because we are still paying for fuel based on oil being 100 dollars a barrel.

This is how oil may fluctuate in price but the average price hasn't really changed for many decades but our fuel prices have kept rising to stupid levels. Oil companies are making obscene profits because we are now paying for fuel effectively based on an oil price of around 300 dollars a barrel which is more than 3 times it's actual cost.


[ posted by Laurence Garrett, 16.08.15 13:23 ]

Perhaps the Government should be seen to do more about the prices at the pumps, and controlling them, that way it would take the focus off of them for charging to much tax on fuel in the first place. Unfortunately the ordinary driver gets hit in the pocket from both directions. The retailers rip us off with the help of the Government.


[ posted by Dale, 16.08.15 17:24 ]

Yes, the retailers blame the governments taxes for their high prices and the government blames the retailer for the high prices.

VAT was originally created to make imported good cost as much as home produced goods to boost our economy. The government extended VAT to cover all goods and services because it was a nice money spinner for them. As a result, imported good were once again cheaper than home produced goods, our economy went into decline and yet we all pay a lot more for all our goods. In the case of fuel, the government add 60% tax and then charge VAT on that tax which is actually illegal. But then, when has the government ever done anything that's legal?

The Magna Carta: We shall not be unfairly taxed on our income.
So the government created indirect taxation, council tax, VAT, car tax, and many others. Even these "licenses" that people have to have in order to do their jobs (SIA and CORGI etc) are a form of taxation.


[ posted by Dale, 16.08.15 17:01 ]

In my view, the number one reason for the fuel prices being what they are is the fact that when oil goes up in price, so do pump prices. However, when oil goes down again, we see no change at the pumps. This trick of ever increasing prices is not limited to oil companies though, gas and electricity companies are among those who have been using the same trick to vastly increase their profits at the customers expense. It's a con trick that's been used by many companies for years.

The people, while not ignorant of it, have been putting up with it instead of doing something about it. It's time we started to do something about it and keep on doing something each time they try this trick in future.


[ posted by Allan Sutherland, 26.08.15 06:52 ]

I have just heard a report on BBC news this morning confirming that fuel producers are not passing on the benefits of dropping oil prices to the motorist. They are instead using these reductions to boost their profit margins. In the wider world, customers can simply stop buying or reduce the amount they buy on many products in protest, but as most of us have to buy petrol and diesel for our daily needs, it is difficult to use this strategy.

I am old enough to remember when all you bought at a petrol station was fuel and possibly the odd can of coke or similar. Nowadays most major petrol stations are mini supermarkets, seeking some or our hard earned! As this could be described as "convenience shopping" perhaps we could conveniently do our shopping in traditional shops and stores as our individual protest to unfair fuel pricing?

While the intention is not to hurt the private site franchise holder, I think such such action must add pressure to our cause and feed back to the fuel suppliers.


[ posted by Michael Brook, 02.09.15 12:53 ]

What really p's me off is the orca its of the fuel companies. I live in a rural area and the fuel price can vary as much as 6p a lire for diesel. Take for example the filling sataions on the A19 around the Northallerton area £112.9 but travel a few mile up,the road to,the same branded fuel and it six pence cheaper. Got into Northallerton itself two filling stations and they are charging the same as the A19 filling stations. Transport costs can't come into it as they all come from the same refinery just loaded into different branded tankers. Rip off Britain again.


your name*

email address*

Add your own comments below this post. They are very welcome*
You may use these HTML tags:<p> <u> <i> <b> <strong> <del> <code> <hr> <em> <ul> <li> <ol> <span> <div>

verification code*