Diesel isn't far off the record high of April 2011 - £1.42 a litre - when oil was $122 a barrel. Well Brent Crude is $10 less now and we're still paying near record prices. And we're going to have to carry on paying them. You can ignore all the talk of lower oil prices in 2013 because the industry wants prices to be high. This is a $20 trillion casino with thousands of players betting on rising numbers. For the last eight years the oil market has consistently acted to hike prices up. OPEC has now cut production to its lowest level since October 2011 and is planning even more restrictions on supply. Russia's grumbling too about prices and will cut back production to move the numbers up. And there's nothing we can do.
Figures from China showing improving growth (the Chinese make up two thirds of global demand) have put a spring in the oil industry's step and some analysts are saying that Brent could hit $120 a barrel before long. This will be a self-fufilling prophecy as traders and commodity houses bet on future rises and tickle the market up. And don't think that fracking in the US will make the price go down. its a very expensive process and the industry claims that conventional drilling results in a full cost per barrel of $92 so fracking-sourced crude will cost even more to produce. The new Seaway pipeline expansion in the States won't help either as the cost of shipping on tankers adds more to any notional savings on every barrel.
I hope the Treasury analysts are aware of the gathering storm clouds because the horizon looks dark. If we're at £1.41 a litre for diesel now with Brent Crude at $111, just imagine what the price is going to be when oil hits $120 a barrel?
That's why we at FairFuel think a duty cut is absolutely essential and we need to nail a proper fuel stabiliser in 2013 to stop diesel hitting £1.60.
If oil goes up the way some are predicting we need a mechanism that brings duty down and protects the economy. Managing fuel duty intelligently is about putting more money in people's pockets. We have a consumer-driven economy that was built on credit and now that credit has been taken away, yet we still expect consumers to spend. As the high street will tell you, that's not happening right now and we need to harness every fiscal mechanism we have to free up disposable income as soon as possible. Businesses, hauliers and families spending less on road fuel will create badly-needed economic activity for the high street and create UK jobs and growth.
2013 isn't looking good and the government needs to act now to ease the price of transport and put money back into the consumer economy. If you think £1.41 for a litre of diesel is a heavy price to pay, just wait until it hits £1.50.