Fleet News

Fuel concerns lessen as petrol prices fall

Fleet managers will be breathing a sigh of relief as the summer of soaring fuel costs appears to be ending, and a season of stability takes over.

According to analysts, oil prices have fallen by 31% since a peak of $147 a barrel in July, to below the $100 mark this week, while the AA says the average price of fuel is now 113p per litre for petrol and 123p for diesel. 

While still not cheap, experts believe prices will drop further, relieving a huge financial burden on fleets. 

A spokesman for the Petrol Retailer Association (PRA) said: “We envisage that fuel prices will continue to drop over the autumn as demand falls.

Generally, there’s a slight rise in demand over Christmas, but we don’t see any indication that prices will rise again in the near future to the levels earlier in the summer.”

The direction of fuel prices over the next few months is not set in stone though. A spokesman for the AA said: “The price of fuel over the next few months will depend on a number of things that cannot be predicted: if a hurricane takes out refineries in the American south, if there’s unrest in the middle east, if the pound keeps weakening against the dollar, among other reasons. Basically, although prices are dropping now, don’t count your chickens before they hatch.

“The situation is a little rosier at the moment, but diesel prices could rise, especially if there’s a cold winter in America where the majority of houses are heated by oil, which would push up demand, and prices.”

Some analysts speculate that the poor summer in the UK might have played a part in the effect of pushing down fuel prices.

Just as usage drops as the weather gets colder and people stay at home, so the wet July and August may have persuaded people to stay at home, lessening demand.

According to the AA, only analysis at the end of the year will be able to see if this is true.

The AA has been putting pressure on the fuel retailers to drop prices in line with oil prices.

It says that the last time a barrel of oil hit $100 was on April 1, when the fuel price was 107per litre, as opposed to nearly 113p now.

According to the PRA, the reason fuel prices have not dropped at the same rate as oil prices is because there is a six to eight week lag. What is currently in the pumps is what was bought nearly two months ago.

The AA said that supermarkets such as Asda, Morrisons and Tesco have been much quicker than the oil companies to drop forecourt prices.

Controversy raged last week when OPEC announced it would cut oil production by 520,000 barrels per day, a move that led to slight rise in oil prices.

It said the cutback was needed because of a lowering demand for oil as a result of the global economic slowdown.

At a meeting of energy experts in Abuja, the EU Commissioner for Energy, Mr Andris Piebalgs said the European Union was opposed to the move, hinting that it could be construed that the major oil producers could be accused of price fixing. 

He said: “We believe that OPEC should not reduce or increase its production into the market. Let market forces determine the price, as we still know that there is very high demand for oil by China and many emerging economies. This practice is what makes the world to look as if OPEC is responsible for high crude prices.”

Why did fuel prices reach such astronomic levels? In the USA, the Commodity Futures Trading Commission is to send a report to Congress the role speculators have played in the oil market this year.

In the first third of the year traders poured $60 billion into commodity markets, causing a big spike in oil prices while they looked for big profits.

Between May and July the US Congress held hearings about reining in such speculation, at which point traders pulled $39 billion from the market, the report stated.

 

Oil hit a record $147 a barrel in July, and has been falling ever since.

The report said: "The bottom line here is that with regard to commodities, money going in pushes prices up, money going out pushes prices down."

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