The decision of the British fair trade watchdog Office of Fair Trading this week to launch an investigation into UK retail petrol prices has been universally welcomed while oil companies have been rather silent.
The oil giants who must protect their GBP32bn-a-year UK operations will no doubt send an oil slick of defences to the debate in the weeks ahead. They have, after all, hardly been sitting there naively wondering whether they will ever get a review. And if their years of strategy building are sound, they have little to worry about.
I recall paying 51 pence a litre for standard unleaded fuel in 1996. It has recently been three times that much at the UK pumps. Except in Gibraltar where I was able to fill up a tank for about 60p/litre in November 2009. Clearly tax plays an enormous part in this and no doubt the oil companies have nothing to lose by exposing that fact in the face of a government that isn’t going to block the OFT.
Consumers remain puzzled how it can be that when global oil prices drop UK pump prices are sticky on the way down. And I have often remarked about the distortions that appear to allow prices to rise – in the face of one of the deepest recessions in living memory. Blaming demand on India and China isn’t all that helpful. Their economies too are slowing. Speculation on commodity derivatives by banks keen to fill losses since the 2007 credit crunch is also only part of the answer.
So now those who distribute the stuff around the UK are being asked to answer. What unfortunately the OFT will not have jurisdiction to do is interview those further back in the food chain, the pipelines themselves. Oil empire OPEC has often threatened us with higher oil prices. It happened for political reasons after the Arab-Israeli War, known as the Yom Kippur War, of 1973. It happened again over Iran in 1980-81. And OPEC ministers threatened us with USD200/barrel prices in 2008 as the recession had already started to take root.
In 2002 I used to visit with my future wife a place in Wiltshire to buy organic trout. It was a 90-minute drive from south-west London. The journey always took me past a rural place with just one petrol station for miles. I remember how it looks but can’t remember the name of the pump or the village. But what I cannot forget is the price. It was – back then – 130p a litre of unleaded fuel. That was every month. Indeed in 2004 it was still saying 130p! As the chart below may show, this was well above prevailing UK petrol prices. I joked that one day prices will catch up with the place. And when it reached 150p/litre recently before falling back, it was a bargain!