I'm not an economist, but

[SteveG]

if the cost of oil is now at $97 a barrel, down from it's peak of $147 in mid July, why am I still paying at least £124.9 at the pumps near me??

The mathematics just don't add up to me. They were raising daily when then the price of oil was going up by $3-4, yet when it shed one third of it's price there's hardly any movement.

Cheers

Steve

[MudAllOverIt]

Been wondering exactly the same thing myself Steve. Profiteering on the part of the petrol suppliers -- surely not

[Retroanaconda]

The term 'artificial price hiking' comes to mind

[sgnas]

The price has not come down as quick as you expect because the price is in dollars.

3 or 4 months ago, certainly the beginning of the year, there were 2 dollars to the pound.

Now it is 1.7 dollars to the pound and may go to 1.6!

So if the barrel price has gone down 25% the exchange has gone 15% the other way and the reduction in pump price is only 10%.

How the dollar is increasing in value when the US government has had to shore up it't 2 biggest lenders and a HUGE investment bank has gone pop is a mystery.

I had the big conversation at work today and basically the thought is " a dollar is always a dollar", "most commodities are priced in dollars". However carp the US economy is, the dollar is still seen as a safe haven. Basically people (or in this case big investors) would prefer to stuff dollars under the mattress than any other currency.

[BogMonster]

why am I still paying at least £124.9 at the pumps near me??

F me that is expensive. Last time I was in the UK it was only about £0.90

[MJIbex]

if the cost of oil is now at $97 a barrel, down from it's peak of $147 in mid July, why am I still paying at least £124.9 at the pumps near me??

The mathematics just don't add up to me. They were raising daily when then the price of oil was going up by $3-4, yet when it shed one third of it's price there's hardly any movement.

Cheers

Steve

I'll sell you fuel at £60 per litre and then we'll both be happy!!!!!!!

Mark.

[western]

why am I still paying at least £124.9 at the pumps near me??

F me that is expensive. Last time I was in the UK it was only about £0.90

try 124.9 pence,

register on www.petrolprices.com to find your nearest cheapest garage

[Turbocharger]

I think part of the problem (along with the exchange rate problem) is that the large retailers have hedged their prices (I know bus companies do). If you've hedged when the price was high, that's what you're stuck with. Because of the way market forces work, even if you're then forced to sell above the 'market' value some smaller suppliers will undercut you until they run out of fuel. Effectively, you pull their price up to yours to prolong their sales - involuntary price fixing.

Nobody's betting on the long-term oil price falling, so everyone's hedging for 1, 2, 3 years at a sensible price today. If that's sub-$100 then fantastic, but even if it's not it could look like a bargain in 36 months.

[jules]

Your forgetting TAX

A mate is a tanker driver and he was talking about it the other day when fuel was £1.34 per lt the tax was 98p

Stealth tax or green tax or just down right robbery

[BogMonster]

try 124.9 pence,

I know, it was a thinly veiled attempt at humour

[Mo Murphy]

I'm not a gynecologist but ...

Sorry Steve, I get my coat

Mo

[reads90]

F me that is expensive. Last time I was in the UK it was only about £0.90

I know what you mean, it was that when i left the UK . Went back on holiday to the uk last may and put £50 in a 90 and that went no where. My disco coasts me £30 - £40 to fill up here in Aus

[SteveG]

Sorry about the amount, problem with running on a US keyboard with no pound symbol. Put price in pence and then went to get pound symbol and forgot to move decimal.

Anyway to discuss the raised justifications of tax and dollar rate..

Taken from the latest budget the current fuel duties are..

Fuel duties

All fuel duty rate changes will take effect from 1 October 2008.

Pence per litre (unless stated) Old duty rate Change New duty rate

Ultra-low sulphur petrol/diesel 50.35p +2p 52.35p

Sulphur-free petrol/diesel 50.35p + 2p 52.35p

Biodiesel 30.35p +2p 32.35p

Bioethanol 30.35p + 2p 32.35p

Liquefied petroleum gas used as road fuel 16.49p per kg + 4.28p per kg 20.77p per kg

Natural gas used as road fuel 13.70p per kg + 2.89p per kg 13.70p per kg

Rebated gas oil (red diesel) 9.69p + 0.38p 10.07p

Fuel Oil 9.29p + 0.37p 9.66p

So let's take my current local Sainsbury's price of 124.9p, take away duty of 50.35p and you have 74.55p

The peak price for Oil was $147.7 on July 11th 2008. On that day the exchange rate was $1.98 to the pound. Today's rate is $1.79 to the pound.

So the delta in exchange rate is 9.6%. So on 11th July a barrel of oil cost £74.60 and today it would cost £54.19, which is a reduction of 27.4%

I don't know what the price per litre of fuel was on 11th July, but the highest I recall it going up to locally was 129.9 at Sainsbury's. So minus fuel duty that is 79.55p

So it was equivalent to 79.55p in July and it's now equivalent to 74.55p today. That's a 6.3% reduction in price, when the raw cost has reduced by 27.4% taking into account fuel duty and currency fluctuations. In percentage terms if the price at the pump is following the cost of a barrel of oil, we should be at about 108.10 pence per litre of diesel.

As I said before the sums just don't add up.

Cheers

Steve

[Troddenmasses]

Sorry about the amount, problem with running on a US keyboard with no pound symbol. Put price in pence and then went to get pound symbol and forgot to move decimal.

Try holding the Alt key, and typing 156 - should give you the £ symbol. My wife does a lot of writing in German, and we don't have a German keyboard, so she is constantly having to use alt functions to get ä and ß and suchlike

Back to the topic - i'm sure that it is hedging that's the problem - that's what took XL airways out of business - hedging at $1.25 - seemed great for a little while, and then like a terrible choice. 'Turbocharger' and I have a little bet going - he thought that diesel will be at £2.00 per litre by the end of the year, and I reckoned that it would be below £1.50 - there's only a pint resting on it, but it will be interesting to see.

[GBMUD]

You seem to have left VAT out of your calcs there Steve. The pump price obviously includes 17.5% VAT - the amount of tax payable therefore varies with the price of the fuel and not just the volume.

Chris

[SteveG]

You seem to have left VAT out of your calcs there Steve. The pump price obviously includes 17.5% VAT - the amount of tax payable therefore varies with the price of the fuel and not just the volume.

Chris

I left it out as it's a constant on both figures and it is a linear calculation, unlike fuel duty which is a fixed cost per litre. I could do the full calc, but it's going to be close to above.

Cheers

Steve

[SteveG]

So here's the calc with VAT..

Fuel duty 50.35 +VAT = 59.16

July 2008

129.9, minus 59.16 = 70.74 minus VAT = 60.2p

Today

124.9, minus 59.16 = 65.74 minus VAT = 55.95

So approx 7% decrease in price between peak and now, yet there has been a 27.4% decrease in barrel cost.

Sorry but I don't agree with the commodities futures buying argument too. With the amounts involved any fuel retailer that is not a producer would have to be calling out trading provision risks in their financial reports. For example the supermarkets are one such example, and you won't find any provision in their annual report calling out risk from future placements in the price of oil. To have an impact they'd have to be placing pre purchase contracts running into several hundreds of millions of pounds and then call out the risk associated with doing this. Unless you can prove that this is happening then for now I doubt this is having any impact.

Cheers

Steve

[Guest otchie1]

So here's the calc with VAT..

Fuel duty 50.35 +VAT = 59.16

July 2008

129.9, minus 59.16 = 70.74 minus VAT = 60.2p

Today

124.9, minus 59.16 = 65.74 minus VAT = 55.95

So approx 7% decrease in price between peak and now, yet there has been a 27.4% decrease in barrel cost.

Sorry but I don't agree with the commodities futures buying argument too. With the amounts involved any fuel retailer that is not a producer would have to be calling out trading provision risks in their financial reports. For example the supermarkets are one such example, and you won't find any provision in their annual report calling out risk from future placements in the price of oil. To have an impact they'd have to be placing pre purchase contracts running into several hundreds of millions of pounds and then call out the risk associated with doing this. Unless you can prove that this is happening then for now I doubt this is having any impact.

Cheers

Steve

Simply because people have to buy fuel and the privately controlled fuel cartels noticed that although their petrol sales dipped a bit, their profit was up as they work on a markup %. As Joe Public seems to have no say in how rigourously he's shafted at the pumps then little piggy is gonna be made to squeal till he bleeds.

Welcome to the reality of market capitalism.

[Turbocharger]

The supermarkets do heavily hedge their fuel purchases, in big contracts. I'm no financier but I don't think they need to report on these as specific risks, they're effectively reducing risk by buying at a fixed cost.

Otchie's peak and trough calcs present the worst-case that hedging tries to avoid. Remember, most(!) suppliers didn't hedge on July 11th so the pumps were insulated (to a point) from the very highest prices. You can't have it both ways.

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[Corrode Finger]

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