Petrol prices- when does the madness end?
Discussion
liner33 said:
If it was demand then then the oil price would be higher , I don’t believe it’s demand I think the biggest factor is refining costs and availability
There are multiple factors at play. Demand isn't any higher than it has been when oil has previously been much cheaper. It's a supply and risk issue at this exact moment in time in terms of raw material costs. The Saudis and other OPEC members aren't supplying as much as they can. Plenty of the higher cost wells that were mothballed due to lockdown price collapse aren't yet back in stream and won't be for up to 18 months. And then you have the risk and disruption of blocking Russian oil to the West so the supply paths are rerouting as Russian oil now has to travel further to Asia and the West has to ship in from further away.
The US has also debased its currency over lockdown so a chunk of the rise in oil isn't actually a rise in oil at all but a fall in the USD as you're seeing in other commodities such as gold.
On top of those raw material issues we now have higher eco costs and refining has become more expensive due to raised shipping, distribution, labour and energy costs.
In reality, if it were actually a demand issue the underlying price of oil would be far higher than it currently is.
MuscleSedan said:
Texas now close to $5 a gallon, 18 months ago it was $2.50 a gallon.
Yup. Much bigger issue in the US among low income households than in the U.K. There's little tax so the fluctuations have much more impact. Unlike in the U.K. the poorest in the US tend to have cars. Mobility in the US is massively more car dependent among the poorer households in the US. Distances needed to be covered are far greater in average. And of course, in the US the poorest car owners tend to have cars as non frugal as the wealthiest in the U.K.
They are far more exposed to fuel inflation than we are.
liner33 said:
Its going to get worse before it gets better but i think we should get used to £2 a litre
Round me something funny happened to diesel prices - they were shooting up with the usual suspects more expensive than supermarkets, then when they got to 199.99 they froze. So now diesel costs the same whereever you go. I'm sure one day they'll burst through, but there seems to have been a little psychological barrier at £2 that they are very reluctant to be the first one to go through.There's no great reason for oil to drop particularly hard any time soon. Slowing global growth will eventually start filtering through but it seems more than likely that OPEC+ would cut their supply so as to maintain a higher than necessary price.
The most obvious hope would be that Biden, fearing a domestic backlash from high oil being greater than the backlash for lifting the blockade on Venezuela makes that jump. Releasing the world's largest reserves to flow onto the market is potentially the only thing that would securely bring oil well under $100.
That said, there isn't a huge amount to drive it up a big amount further. OPEC wants to reap the rewards of high oil but not too high that it kills the global economy and for demand to then slump on them. Russia needs to sell as much as possible to keep its economy afloat. I guess the real risk in this regard is a deliberate supply constraint caused by something like a strategic attack such as the Yemeni rockets into Saudi a few months back or the blocking of Suez etc.
The most obvious hope would be that Biden, fearing a domestic backlash from high oil being greater than the backlash for lifting the blockade on Venezuela makes that jump. Releasing the world's largest reserves to flow onto the market is potentially the only thing that would securely bring oil well under $100.
That said, there isn't a huge amount to drive it up a big amount further. OPEC wants to reap the rewards of high oil but not too high that it kills the global economy and for demand to then slump on them. Russia needs to sell as much as possible to keep its economy afloat. I guess the real risk in this regard is a deliberate supply constraint caused by something like a strategic attack such as the Yemeni rockets into Saudi a few months back or the blocking of Suez etc.
bigothunter said:
Remove the tax, and price of petrol in USA and UK is remarkably similar. Data suggests UK petrol could be fractionally cheaper...
There have been shipments of oil from the UK to the USA, the UK price is high due to taxes, not due to the underlying cost of the oil. DonkeyApple said:
The most obvious hope would be that Biden, fearing a domestic backlash from high oil being greater than the backlash for lifting the blockade on Venezuela makes that jump. Releasing the world's largest reserves to flow onto the market is potentially the only thing that would securely bring oil well under $100.
The sanctions on Venezuela are already being quietly released, Chevron (?) who are the only Western company still operating there were allowed to ship more oil recently although it's not being paid for in dollars but swapped or used to pay back debts. There is the ongoing discussions about the Iran nuclear deal which could open up Iran again to more Western companies. Crack spreads (ie refining profits) are at a record high, because a lot of refining capacity in Russia has been sanctioned, and so as well as a high oil price, the cost of producing petrol from it is very high.
Zerosumgame said:
I wonder if the G7 price cap on Russian oil will come to anything? Other than essentially allowing Western companies to buy Russian oil under the guise of whatever the discount turns out to be
I doubt it, you can't force the Russians to sell at a low price, and why (if you were Russia) would you sell to the EU cheaply whereas you can stick it on a boat and send it to China or India who may pay closer to the world price?I've all but stopped driving my car now. Switched to the motorbike and I'll look at getting back on the bicycle for commuting.
It's not a case of I can't afford. For me I'm not paying what they are asking. My psychological barrier is 1.89.
When barrel prices fall back to old levels I guarantee pump prices don't drop below 1.60. Ever again.
There'll be lots more people changing their ways or buying electric.
That's when the government will have to bring in road pricing as there'll be a huge whole in their fuel revenue.
It's not a case of I can't afford. For me I'm not paying what they are asking. My psychological barrier is 1.89.
When barrel prices fall back to old levels I guarantee pump prices don't drop below 1.60. Ever again.
There'll be lots more people changing their ways or buying electric.
That's when the government will have to bring in road pricing as there'll be a huge whole in their fuel revenue.
Hugo Stiglitz said:
I've all but stopped driving my car now. Switched to the motorbike and I'll look at getting back on the bicycle for commuting.
It's not a case of I can't afford. For me I'm not paying what they are asking. My psychological barrier is 1.89.
When barrel prices fall back to old levels I guarantee pump prices don't drop below 1.60. Ever again.
There'll be lots more people changing their ways or buying electric.
That's when the government will have to bring in road pricing as there'll be a huge hole in their fuel revenue.
Everything is falling into place very nicely. Just sit back and enjoy the ride...It's not a case of I can't afford. For me I'm not paying what they are asking. My psychological barrier is 1.89.
When barrel prices fall back to old levels I guarantee pump prices don't drop below 1.60. Ever again.
There'll be lots more people changing their ways or buying electric.
That's when the government will have to bring in road pricing as there'll be a huge hole in their fuel revenue.
It's nothing to do with forcing Russia to do anything. It's legitimising the purchase of Russian oil by Western countries under the guise of a loosely defined cap.
China and India are already paying a discount to Ural/Brent/WTI for Russian oil....but that's not the point
China and India are already paying a discount to Ural/Brent/WTI for Russian oil....but that's not the point
Condi said:
Zerosumgame said:
I wonder if the G7 price cap on Russian oil will come to anything? Other than essentially allowing Western companies to buy Russian oil under the guise of whatever the discount turns out to be
I doubt it, you can't force the Russians to sell at a low price, and why (if you were Russia) would you sell to the EU cheaply whereas you can stick it on a boat and send it to China or India who may pay closer to the world price?Condi said:
Zerosumgame said:
I wonder if the G7 price cap on Russian oil will come to anything? Other than essentially allowing Western companies to buy Russian oil under the guise of whatever the discount turns out to be
I doubt it, you can't force the Russians to sell at a low price, and why (if you were Russia) would you sell to the EU cheaply whereas you can stick it on a boat and send it to China or India who may pay closer to the world price?Hugo Stiglitz said:
When barrel prices fall back to old levels I guarantee pump prices don't drop below 1.60. Ever again.
You can guarantee it can you? How about this, when fuel prices do go below £1.60, you pay me the difference between £1.60 and the pump price, that way YOU will keep paying £1.60/liter forevermore? 
The levels of tinfoil hattery have reached cosmic proportions. How do you all live your life thinking the world is so tilted against you?!
One of the local stations had diesel at £2.04 a litre.
It’s now dropped back down to £1.99 a litre.
Maybe the £2 barrier was too much for some and they avoided the station.
The shell garage I use has remained at £1.93 for a few days now.
It kept going up by 3-5p increments every few days till recently.
It’s now dropped back down to £1.99 a litre.
Maybe the £2 barrier was too much for some and they avoided the station.
The shell garage I use has remained at £1.93 for a few days now.
It kept going up by 3-5p increments every few days till recently.
Zerosumgame said:
It's nothing to do with forcing Russia to do anything. It's legitimising the purchase of Russian oil by Western countries under the guise of a loosely defined cap.
China and India are already paying a discount to Ural/Brent/WTI for Russian oil....but that's not the point
Yes, I know China and India are paying a discount, I don't know where the discount to Brent is today, it got to $30/bbl at the start of the war but has probably recovered a bit since then. China and India are already paying a discount to Ural/Brent/WTI for Russian oil....but that's not the point
My point was its all very well saying Western countries can buy below a cap, but if the cap is $100/bbl (say), and Russia can sell to China at $110/bbl, then the whole thing is pointless because Russian companies will simply sell to another buyer. You have to set the cap high enough to compete with other buyers and by the time you do that you may as well not bother with the cap at all.
Condi said:
Hugo Stiglitz said:
When barrel prices fall back to old levels I guarantee pump prices don't drop below 1.60. Ever again.
You can guarantee it can you? How about this, when fuel prices do go below £1.60, you pay me the difference between £1.60 and the pump price, that way YOU will keep paying £1.60/liter forevermore? The levels of tinfoil hattery have reached cosmic proportions. How do you all live your life thinking the world is so tilted against you?!
So I think £1.60ish is likely to be where we settle back to when oil settles. This is where the price was going to be by now if Covid hadn't happened. And in reality, for most people the current higher costs netted against the near zero spend during lockdowns will mean few are actually out of pocket at all over a 3-4 year period.
For all the frothing about profiteering to date, I believed that where Govt will need to step in with threats is when oil comes back down. Fuel vendors will have the desire to lag as well as the opportunity so political pressure is likely to be needed to speed up the competitive environment.
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