The recent fall in oil prices shows us two worrying things. Firstly oil future speculators have much more effect than we realise. Data in the last week that the Chinese economy isn't recovering as strongly as previously thought has caused a rash of selling which has brought down crude prices. City traders had been betting on increased demand and panicked when they heard that Chinese demand might not be as strong as they'd thought. All of which means that the recent frightening rises in oil prices weren't actually due to the fundamentals of supply and demand, but the mischevious antics of a few blokes in red braces in London and New York. That's why we need a mechanism that protects our economy from the volatility that oil speculation causes. A transparent stabliser that brings down fuel duty when the city traders talk the market up.Which they'll continue to do, as long as they can.
The second concern is that we're not seeing falls in wholesale prices translated to the forecourts quickly enough. There's a normal 10 to 14 day delay because when garages have bought at the higher price, they can't then reduce prices immediately to reflect the lower oil prices because they'd lose money. Fair enough. But there's clear evidence that forecourt reductions aren't happening quickly enough. As soon as the stuff goes up, forecourt prices increase the next day, but not the other way round. A government investigation with (if necessary) legislation to force the market to honestly reflect wholesale prices changes is long overdue.
This Summer we may see slightly lower petrol and diesel prices - for a bit - but it won't last. The same daft market dynamics that frightened us all silly this year will inevitably kick in again. This government needs to start managing fuel prices and developing a long term protectionist strategy to shield the economy from the damage of oil speculation. Until Westminster really gets to grips with the oil market we'll always have these debilitating swings in prices. For a 21st century, first world economy, the current system sucks.