Fuel Price falls - but rather slowly

In December last year, the AA reported that prices had "soared" by 7% for petrol and 11% for diesel in the last three months. At that time, the average price for unleaded was £1.02.8 and diesel was £1.08.0. If they but knew... Over the following six months, oil inexorably rose, and with it, our price at the pumps. Only a few short weeks ago a barrel of oil reached $147, and us poor beleagured motorists were having to find as much as £1.35 a litre for diesel fuel. Its almost a relief, then, to top up my Land Rover today at a 'mere' £1.22 a litre. But hang on, isn't a barrel of crude changing hands at just £128 dollars at the moment? Something doesn't smell right, and it isn't the diesel I just spilled down my trousers...

During June and July, crude oil price rises came almost daily, and forecourt prices rose almost in parallel. At one stage, petrol rose 5p a litre nationally in just 48 hours, mirroring oil price rises spurred on by huge increases in demand from China, fears in the Middle East, and demand from large-scale speculators. Since that peak, oil prices have fallen over $30 a barrel, yet fuel prices have so far fallen off a mere 10p a litre. According to the AA, wholesale prices for petrol coming into the UK have fallen 18 per cent and 22 per cent for diesel. The fall at the pump is under 10%. What's going on? As ever, the dear old British motorist is being bent over and rogered mercilessly. Having been 'conditioned' to accept fuel at £6 a gallon, why would fuel producers want to back away from that? Unlike most markets, the demand for fuel isn't hugely affected by price - we 'need' it, so we'll have to pay for it whatever it costs. Many economists believe that we will still hit the $175 barrel this year, some even forecast $200. When and if those rises occur, all the more likely with the current conflict in Russia, the pump prices will rise pro-rata with the current price, and anyone who imagines that pump prices have 'room' to absorb oil rises (on the basis that they've never fallen low enough to get back in touch) is going to be sorely disappointed.

In the first half of this year, BP made profits of over thirteen BILLION dollars, up 23% on the same period last year. Exxon, Shell, and Total all filed similarly breathtaking profits. So much for their laments that they are simply passing on increased costs. OPEC, the cartel which seemingly exists for no other reason than to extract maximum revenue for its products, claims that they are 'safeguarding' the future of oil supplies by limiting output, but conveniently neglect to mention that keeping supplies low means keeping prices high. So, who's on the motorists side in this issue, looking out for his interests, protecting him from the vultures who would rape his wallet to satisfy their own obscenely-rich shareholders?

Well, dont bank on the Government to help you out. Their own income from fuel duties has increased significantly, despite crying crocodile tears for motorists and 'delaying' the 2p escalator increase. This is because while fuel duty is a constant figure, VAT is also then charged on both the fuel cost and the duty element. Although its fallen off - marginally - since, the total tax on a litre of fuel was at one stage an outrageous 81.5%! The billions in extra unexpected revenue from VAT on higher prices has more than offset the 'loss' to the Government in not robbing us of a further couple of pence duty. Actually, HMG is eyeing a bigger prize - a 'windfall' tax on those massive profits BP just proudly declared. To be honest, its difficult to decide who deserves that money least, but at least if the pigs in Whitehall get their snouts in the trough it might benefit the country in general.