Petrol prices- when does the madness end?
Discussion
Jawls said:
Mr Spoon said:
That is quite a naive statement to make. Platts is just one method of pricing. Force Majeure can be triggered with any shift like that, causing price rises
It depends what you did in the industry, but I've been buying tens of millions in distribution fuel for quite some time. Let me make this statement again. The government can remove all the fuel duty and it doesn't mean prices will fall. There might be some media led attacks for this to happen, but fuel is like houses. Once the industry can see that the common public are paying these prices, there is no incentive whatsoever for any reduction.
Think SDLT removal. All of a sudden, everything was SDLT more expensive.
You can’t FM to change a pricing basis, you’d be laughed out of town if the party you were declaring FM to had a competent legal team. FM’s are for things like “my crude distiller has blown up, no product for you”. Of course, if someone is buying on the spot market than it’s trivial to change premiums and that’s why you want a supply context, but even on spot market duty is called out specifically on the price notifications. It depends what you did in the industry, but I've been buying tens of millions in distribution fuel for quite some time. Let me make this statement again. The government can remove all the fuel duty and it doesn't mean prices will fall. There might be some media led attacks for this to happen, but fuel is like houses. Once the industry can see that the common public are paying these prices, there is no incentive whatsoever for any reduction.
Think SDLT removal. All of a sudden, everything was SDLT more expensive.
I worked for a large refiner, but would prefer to leave out details of my role.
Yes, I agree it is possible for duty to go down and price to go up (though with a big duty move, it’d be hard to fully counteract it). But that any such move would be caused by wholesale cost input changes and/or local competitive environment.
Totally disagree it’s like houses. Fuel can and does fall in price significantly. The wholesalers often have v little connection to the common punter filling his car up and there are too many intermediaries.
Edited by Jawls on Thursday 23 June 14:11
I was making the connection about the sdlt. Any government reduction would be swallowed up. Yes fuel does decrease in value.
If you have any connection to the oil industry, you would be able to recall both of these force majeure situations. Oh and it was the major oil companies calling it.
Regarding the post about the sellers cartel. Ever heard of OPEC ffs
Mr Spoon said:
Jawls said:
Mr Spoon said:
That is quite a naive statement to make. Platts is just one method of pricing. Force Majeure can be triggered with any shift like that, causing price rises
It depends what you did in the industry, but I've been buying tens of millions in distribution fuel for quite some time. Let me make this statement again. The government can remove all the fuel duty and it doesn't mean prices will fall. There might be some media led attacks for this to happen, but fuel is like houses. Once the industry can see that the common public are paying these prices, there is no incentive whatsoever for any reduction.
Think SDLT removal. All of a sudden, everything was SDLT more expensive.
You can’t FM to change a pricing basis, you’d be laughed out of town if the party you were declaring FM to had a competent legal team. FM’s are for things like “my crude distiller has blown up, no product for you”. Of course, if someone is buying on the spot market than it’s trivial to change premiums and that’s why you want a supply context, but even on spot market duty is called out specifically on the price notifications. It depends what you did in the industry, but I've been buying tens of millions in distribution fuel for quite some time. Let me make this statement again. The government can remove all the fuel duty and it doesn't mean prices will fall. There might be some media led attacks for this to happen, but fuel is like houses. Once the industry can see that the common public are paying these prices, there is no incentive whatsoever for any reduction.
Think SDLT removal. All of a sudden, everything was SDLT more expensive.
I worked for a large refiner, but would prefer to leave out details of my role.
Yes, I agree it is possible for duty to go down and price to go up (though with a big duty move, it’d be hard to fully counteract it). But that any such move would be caused by wholesale cost input changes and/or local competitive environment.
Totally disagree it’s like houses. Fuel can and does fall in price significantly. The wholesalers often have v little connection to the common punter filling his car up and there are too many intermediaries.
Edited by Jawls on Thursday 23 June 14:11
I was making the connection about the sdlt. Any government reduction would be swallowed up. Yes fuel does decrease in value.
If you have any connection to the oil industry, you would be able to recall both of these force majeure situations. Oh and it was the major oil companies calling it.
Regarding the post about the sellers cartel. Ever heard of OPEC ffs
As the context they operate in is totally different to UK downstream. The idea that there’s a sellers cartel between the 6 refiners, and major importers/blenders is daft.
I’ve not been out the industry long, so unless the two events you are referring to are very recent I’d likely know about them. I stand by what I said, a refiner or large national wholesaler would not be able to successfully declare FM merely to change a pricing basis. But unless we start comparing CVs and talking stuff that ultimately is probably confidential, we aren’t going to get anywhere here so I’ll bow out.
Edited by Jawls on Thursday 23 June 23:40
Mr Spoon said:
OPEC are the most relevant thing to this situation. And you know that also.
It depends on your view of recent. Last two years this has happened.
What about valero just shutting the taps off to keep the prices rising?
Do I need to mention essar and Kingsbury?
I’ve been out for months, not years. It depends on your view of recent. Last two years this has happened.
What about valero just shutting the taps off to keep the prices rising?
Do I need to mention essar and Kingsbury?
Essar I don’t believe declared FM in order to change pricing bases, though their financing problems were well publicized. I’ll eat my hat if someone accepted an FM to change a pricing basis. Declaring FM due to unit trips is not unusual but that’s different. In the event of a pipe fed terminal like Shell/Essar KB running short on products pricing would be honored to contracted customer with reduced volume and spot market turned off.
Valero have had a turnaround in last 2 years, that’d reduce throughput a lot. A T/A, even an extremely extended T/A isn’t an FM event though. Nor would it lead to pricing bases being renegotiated.
Feel we are talking past each other a bit now though. This all stemmed from a discussion about whether a wholesaler could fail to pass on a duty cut and obscure it. I stand by the view that that’d be impossible as the price notifications call out duty specifically and Platts is public. Premia is called out in the supply contract. So where is the room for shenanigans?
Anyway, as mentioned, I’ll bow out here as we are going round in circles.
Edited by Jawls on Friday 24th June 00:07
Edited by Jawls on Friday 24th June 00:17
Tyre Smoke said:
There are a lot of posters here that either
a) Are happy paying £2/litre for fuel
b) Just like argument for the sake of it
c) Both of the above.
Again, not quite right. a) Are happy paying £2/litre for fuel
b) Just like argument for the sake of it
c) Both of the above.
The reality is that there are some rational posters who don't make claims such as 90% of the price of petrol being tax, claims of oil being $135 in May, who understand that the GBP isn't the USD, who remember that most people saved a fortune during lockdown due to deflated fuel prices and next to no need to buy any, who don't make wild claims about imaginary fuel price movements, who don't resort to instantly believing 'the man' is raping them, or that every car owner drives thousands of essential miles every day or any of the hysterical and ignorant drivel that's been posted. And then there are the women.
You're not seeing some posters endorsing £2/litre fuel, very obviously. What you're seeing is grown ups suggesting that the hysterical folk get a grip. Nor is it arguing to have to repeatedly point out that it's not lizard men, a flat earth, 5G masts or any of the childish lunacy of the hysterical 'it's all the man's fault, give me some more free money so I can go to Dunelm' section of society, it's just that common sense these days needs to be repeated again and again and again because being smart or educated isn't on trend at the moment.
Just because a couple of folk highlight that oil was never at a price that someone claimed, actually published data to show the actual reality, or just because someone claimed petrol was 90% tax and someone posted the actual numbers to show it wasn't doesn't mean those people are happy with £2 fuel or want an argument. It just means that some posters are catastrophically wrong and posting tactless drivel and made-up hysteria that requires correcting.
Mr Spoon said:
OPEC are the most relevant thing to this situation. And you know that also.
It depends on your view of recent. Last two years this has happened.
What about valero just shutting the taps off to keep the prices rising?
Do I need to mention essar and Kingsbury?
Aren't you arguing about U.K. domestic taxation and if it were removed that the refineries would instantly increase their prices to replace it in a monumental act of profiteering?It depends on your view of recent. Last two years this has happened.
What about valero just shutting the taps off to keep the prices rising?
Do I need to mention essar and Kingsbury?
OPEC is of no relevance in that argument, nor is anything to do with the underlying price of the raw materials. It's a view that competitive industry would somehow be able to replace a tax with a profit premium without the need for collusion or any consumer retaliation.
Which, in my opinion, is utter poppycock and quite a random opinion without any contextual basis.
DonkeyApple said:
Tyre Smoke said:
There are a lot of posters here that either
a) Are happy paying £2/litre for fuel
b) Just like argument for the sake of it
c) Both of the above.
Again, not quite right. a) Are happy paying £2/litre for fuel
b) Just like argument for the sake of it
c) Both of the above.
The reality is that there are some rational posters who don't make claims such as 90% of the price of petrol being tax, claims of oil being $135 in May, who understand that the GBP isn't the USD, who remember that most people saved a fortune during lockdown due to deflated fuel prices and next to no need to buy any, who don't make wild claims about imaginary fuel price movements, who don't resort to instantly believing 'the man' is raping them, or that every car owner drives thousands of essential miles every day or any of the hysterical and ignorant drivel that's been posted. And then there are the women.
You're not seeing some posters endorsing £2/litre fuel, very obviously. What you're seeing is grown ups suggesting that the hysterical folk get a grip. Nor is it arguing to have to repeatedly point out that it's not lizard men, a flat earth, 5G masts or any of the childish lunacy of the hysterical 'it's all the man's fault, give me some more free money so I can go to Dunelm' section of society, it's just that common sense these days needs to be repeated again and again and again because being smart or educated isn't on trend at the moment.
Just because a couple of folk highlight that oil was never at a price that someone claimed, actually published data to show the actual reality, or just because someone claimed petrol was 90% tax and someone posted the actual numbers to show it wasn't doesn't mean those people are happy with £2 fuel or want an argument. It just means that some posters are catastrophically wrong and posting tactless drivel and made-up hysteria that requires correcting.
Seems gentle correction and rational debate are impossible here any more.
Tyre Smoke said:
I forgot to add condescending superciliousness. But then, you have form for that don't you?
Seems gentle correction and rational debate are impossible here any more.
Some people just feel victimised and hard done by. The post highlighting the factual error re pricing was perfectly gentle and rational. But that doesn't seem to work all the time, even when the recipient subsequently requests what they've already been given. Seems gentle correction and rational debate are impossible here any more.
DonkeyApple said:
hotchy said:
So a car forum where the majority "don't drive much"
Mumsnets may suit you better.
Arguably shows a lack of understanding of the world though. Not everyone is a travelling salesmen or even need a car for commuting. Some people have partners who do the school run and the shopping. For plenty of people the car is about pure fun as opposed to being a compromised tool for daily chores. Mumsnets may suit you better.
I'd hazard that the average daily travels by car could be higher for users of mumsnet than many car fans on PH.
I have to keep the cars on trickle charge due to not having to use them for commuting, school runs or shopping.
DonkeyApple said:
Indeed it would be on a low salary but the point is that not every car user is in a low salary, not every car user is doing above average mileage and nearly all car users have elasticity in their usage etc. some people won't have opted for the most frugal vehicle and that is no one's particular issue bar the person who made that choice. And then one has to consider that a lot of the higher mileage drivers have allowances etc, this is why, of all the current pricing pressures this one is the most benign.
You keep saying that there is a lot of elasticity in usage, but I’m not at all convinced that’s true. If it was, then with fuel so expensive relative to the recent past then we would be seeing less traffic in the roads. But in my experience the levels of traffic and congestion are much the same as normal, which suggests that most people are using their cars not for the fun of it, but because they need to make the journey that way.mikey_b said:
DonkeyApple said:
Indeed it would be on a low salary but the point is that not every car user is in a low salary, not every car user is doing above average mileage and nearly all car users have elasticity in their usage etc. some people won't have opted for the most frugal vehicle and that is no one's particular issue bar the person who made that choice. And then one has to consider that a lot of the higher mileage drivers have allowances etc, this is why, of all the current pricing pressures this one is the most benign.
You keep saying that there is a lot of elasticity in usage, but I’m not at all convinced that’s true. If it was, then with fuel so expensive relative to the recent past then we would be seeing less traffic in the roads. But in my experience the levels of traffic and congestion are much the same as normal, which suggests that most people are using their cars not for the fun of it, but because they need to make the journey that way.mikey_b said:
DonkeyApple said:
Indeed it would be on a low salary but the point is that not every car user is in a low salary, not every car user is doing above average mileage and nearly all car users have elasticity in their usage etc. some people won't have opted for the most frugal vehicle and that is no one's particular issue bar the person who made that choice. And then one has to consider that a lot of the higher mileage drivers have allowances etc, this is why, of all the current pricing pressures this one is the most benign.
You keep saying that there is a lot of elasticity in usage, but I’m not at all convinced that’s true. If it was, then with fuel so expensive relative to the recent past then we would be seeing less traffic in the roads. But in my experience the levels of traffic and congestion are much the same as normal, which suggests that most people are using their cars not for the fun of it, but because they need to make the journey that way.Even on the most basic level, most car users can compensate for fuel inflation, if they wish to by easing back on the loud pedal. This is less relevant today because so many cars are efficient diesels and drivers have already slowed down since the credit crunch over a decade ago. Just cutting a few non essential journeys will compensate for many and you'd wouldn't necessarily notice that unless you happened to be on the road at the right time and place where that change is more prominent. For example, you wouldn't expect to see a change when commuting per se but you might being able to perceive lower traffic in retail car parks during peak leisure shopping times.
You also have to consider that a very large number of car users aren't really affected by the price rises. They have efficient cars, don't use them heavily and have income and savings sufficient to not inspire any change in habit.
Another way to try and visualise this elasticity is to remember that road traffic always increases in urban and suburban environs when it rains and it increases in winter. That's the most overt display of some of the elasticity being exercised.
And all of this is before we consider the more extreme elasticities of last resort such as car sharing or public transport which we fully appreciate is generally the last actions we would want to take because the car, on our own is infinitely more pleasurable.
We can also consider some very basic numbers such as the average annual car mileage being about 7000. We can obviously appreciate that there are users who do more than that but obviously there are users who do less. At a typical 40mpg that implies an average annual purchase of 800 litres? At £1.40 that's an annual cost of £1100. At £2 that goes up by £500 or £1.40/day.
£1.40/day. Less than a coffee, a little more than a bottle of water.
In the cold light of day, this is not enough of an increase to change the habits of almost anyone.
One has to start wondering, when one genuinely looks at the numbers involved, if many folk simply haven't been victims of a media wind up frenzy. The media has been frothing for months that the world is going to end because of petrol prices but basic analysis of the numbers tends to suggest that it's all a load of hysterical b
ks for almost everyone. It's the impact on the cost of goods that is probably more pertinent and even that raises questions when you start to contemplate how many bananas you can fit on a ship and then in a lorry and spread the higher cost of fuel across a million bananas.
mikey_b said:
You keep saying that there is a lot of elasticity in usage, but I’m not at all convinced that’s true. If it was, then with fuel so expensive relative to the recent past then we would be seeing less traffic in the roads. But in my experience the levels of traffic and congestion are much the same as normal, which suggests that most people are using their cars not for the fun of it, but because they need to make the journey that way.
I think the correct term is Demand Destruction. The usage is not elastic; it gets destroyed permanently. If people are forced (by high fuel prices) to buy more smaller and more efficient cars, for example, their usage of petrol will not increase even if the prices later fall.swamp said:
I think the correct term is Demand Destruction. The usage is not elastic; it gets destroyed permanently. If people are forced (by high fuel prices) to buy more smaller and more efficient cars, for example, their usage of petrol will not increase even if the prices later fall.
That is part of it. It's what we saw in the years after the financial crisis and the last fuel cost squeeze. Longer term driver habits permanently changed with consumers switching to more frugal vehicles and permanently consuming less fuel. However, the more immediate and typically much larger drop is usage due to the inherent elasticity. This was seen the last time around. Consumers quickly cut consumption by cutting some non essential journeys, switching away to other solutions and driving more frugally. That effect subsequently reverses when the economic squeeze ends and there is a reversion to growth and consumers revert to higher spending. You can see both being reflected in this old article: https://www.economicshelp.org/blog/7023/uncategori...
Chart 5 here: https://assets.publishing.service.gov.uk/governmen... shows the total decline of road fuel consumption for discretionary and business and how it correlates to GDP and consumer sentiment. You see the big drop during the credit crunch and how 4/5 years later during a strong economic expansion the demand returned despite vehicles by then being notably more efficient and a strong growth in online shopping and declines in business use.
Just saw this:
https://uk.finance.yahoo.com/news/45-britons-cut-b...
45% of Britons cut back on journeys due to soaring fuel costs – ONS
https://uk.finance.yahoo.com/news/45-britons-cut-b...
45% of Britons cut back on journeys due to soaring fuel costs – ONS
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