Here's a tiny example of how oil prices can be hiked up in a single hour. This week a couple of Tweets from an anonymous Russian source wrongly alleged that President Assad of Syria had been killed or injured. Word spread like wildfire across the oil traders desks and in the sixty minutes that it took for the information to be discredited (I wonder why it took so long), the price of crude jumped $1.17 cents a barrel. That might not sound a lot in isolation, but if on that particular day you were looking to shift a couple of hundred thousand barrels and you did a deal in that sixty-minute window, you'd be rather pleased with yourself. Absolutely delighted if you had a tanker or two holding millions of barrels of the stuff. And if you were an oil company who rashly happened to buy those millions of barrels, you'd have to pass that deliberately inflated price all the way down the supply chain to the poor hapless consumer at the pumps. That's the way it works folks. When you stare at the digits on that petrol or diesel pump, watching them inflate like the currency of a banana republic, around 30% of the price of every barrel of oil is due solely to the continuous market manipulation of fund managers and oil traders. On average you and I pay $30 more per barrel than we should. Oh, and an even more sizeable, but equally questionable, chunk of your cash goes in government taxes.
And to see who gets the lion's share let's look at the numbers. Today I paid £1.37 for a litre of unleaded. Over 60% of that goes to the government, up to 5% to the petrol station owner and the remaining 30% or so to the oil company. The actual cost of the petrol in a £60 fill up before tax is just £24. Of that £1.37 I spent on my litre of unleaded, the wholesale price of the petrol was 51p, the garage profit margin 4.87p, the fuel duty 57.95p and VAT at 22.97p So the government takes the most, followed by oil speculators, then the oil company and then the petrol retailer. To be fair to the oil majors they have to invest billions to get their oil out of ever more difficult places and then refine and distribute it. The oil company's actual operating profit margin can be between 7 to 20%. In 2009 the average oil major margin was 8%. And petrol retailers tell me that they're lucky to retain a margin of 2% on every litre they sell.
So the absolute villains here are the government and oil speculators. Reduce or control their financial take on every litre and the price of the world's petrol and diesel would drop like a falling Steinway. Its as simple as that. The complicated bit is how to make it happen. FairFuel has always believed that relentless pressure and complete transparency of markets and taxation regimes is the only way ahead. And when you consider the massive benefits that lower fuel prices would have on the global economy, you'd think there would be armies of Harvard and Oxford PHDs working on how to make The Big Change happen right now. I know I sound like a misty-eyed idealist, but something's got to give. The current way that oil and fuel is priced and taxed is nothing sort of iniquitous and absurd. But why are you and I, gentle reader, the only one's who seem to care at all?
Quentin Willson Please sign up and support FairFuelUK. We need every signature to put pressure on all involved with pricing our petrol and diesel