First the good news. There’s so much oil sloshing around in the world that nobody quite knows what to do with it all. Storage tanks are brimming over, tankers holding 50 million barrels idly float on oceans and America and Saudi Arabia are pumping out so much crude they’ve added an extra two million barrels a day to global supplies. If Iranian sanctions are lifted another 500,000 barrels could add to this massive spike in oversupply. Experts are now revising their predictions and saying that prices could fall to the mid $30 range (that’s pre 2008 levels) later this year. Venezuela and Nigeria are close to bankruptcy, Russia’s inflation is running at 16%, oil workers are threatening to go on strike, big commodity houses are shedding hundreds of millions in value and all because the black gold is at its lowest point for six years. This rapid fall is unprecedented and shows no sign of stopping. For the oil industry, the good times definitely aren’t rolling.
But for you and me this means as much as a year of cheaper petrol and diesel. Or at least it should do – and here’s the bad news. If the falls in the wholesale price on a barrel of crude (and the wholesale price a litre of fuel) were reflected at the pumps we’d be looking at prices under £1.00 a litre very soon indeed. But that might take longer than everybody hopes because - as the Petrol Retailers Association told Howard Cox this week - those savings aren’t passed on to consumers anything like as quickly as they should be. We now have official confirmation of what everybody’s suspected for years - fuel that retailers hold on to that extra margin of profit for as long as they can. We’ve called this the ‘Rocket and Feather Effect’ – fuel goes up like a rocket and down like a feather - and FairFuelUK has been complaining bitterly about the injustice of Rocket and Feather for years. The PRA claim that these extra slugs of profit gained when oil goes down help insulate independent petrol retailers from periods when their margins are much lower – typically only 3p a litre. And we understand that smaller, independent filling stations have a tough time with so much competition from the supermarkets. But over the last few months some filling outlets have been enjoying over three times their usual profit per litre. Is that fair? Well you tell me?
But now we know the truth there’s a bigger question here: the supermarkets and oil majors buy their wholesale fuels in billions of litres so they get a much greater discount and therefore a much bigger margin when oil prices change. The financial benefits they enjoy from oil price fluctuations could be much greater and the degree to which consumers are being disadvantaged much worse. We have to ask ourselves if there’s another commodity that we’re forced to buy so regularly that has such elastic profit margins – and the answer is no. So why have we had to tolerate this pricing opportunism for so long? Given what we know now it’s entirely possible that some of the big fuel retailers have been taking as much as 15p profit per litre, which on a family car fill up is an extra £7.50p. Across the year that’s nearly £400 - a fortune to most struggling families and for a business an unnecessary extra cost to sales and profitability. We just don’t think that’s fair.
And now the metaphorical cat is out of the proverbial bag and we know that our suspicions about Rocket and Feather are indeed true, we’re calling for an inquiry into fuel pricing, the tax taken by the government to be clearly stated on fuel receipts and for the difference between the wholesale and retail prices of petrol and diesel to be freely and openly published for all to see. This government has made much store of pricing and tax transparency and making sure consumers always get the best deal. They’ve done it with the banks and utility companies so why not the road fuel industry? Armed with this new information about the realities of Rocket and Feather this government now has a moral obligation to do the right the thing. FairFuelUK is here to make sure that it does.