Diesel Prices to Hit Record Highs
RMI Petrol has expressed fears that diesel prices could hit record highs after wholesale costs rose faster and steeper than ever during the holiday period. From December 19 to January 5, diesel prices increased almost 4.50p per litre, while unleaded petrol rose as much as 5p per litre – not including 20% VAT.
RMI Petrol, which is representative of nearly 6,000 petrol retailers and forecourt operators, is concerned that the average price for diesel in the UK could push past the 143p per litre peak seen on May 9, 2011, as the price hit 141p per litre over the last weekend. They think the price could even rise to over 145p per litre in just a few weeks. The rise in diesel prices comes after instability in the Persian Gulf, which led to an unprecedented increase in wholesale prices. Iran threatened to blockade the Strait of Hormuz, while refinery closures contributed to the instability.
RMI Petrol says the recent rises in costs have been so fast that fuel retailers haven’t had any time to even react to them during the holidays, and few retailers have made any big increases at the pump. However, pump prices will have to move up quickly over the weekend in order for the retailers to protect margins, which are already thin and have caused independent companies stress financially throughout the last year.
Furthermore, with the recent 5p per litre rise in unleaded petrol prices, pump costs could rise past the 137.4p per litre high. At the end of last week, prices were already 132.3p per litre. This has put more pressure on consumers and high-street retailers, who are already complaining that people aren’t spending enough due to the high cost of fuel. Aside from the rise in pump prices, the hikes could lead to higher food prices and slow the UK’s economic recovery even more, as most hauliers carrying goods use diesel consuming vehicles.
RMI Petrol chairman Brian Madderson says that this development is very worrying but not completely unexpected. He also warns about rising goods costs, saying that 80% of the UK’s food is distributed by road, and supermarkets and suppliers may look to recover the extra distribution costs by increasing prices. On January 2, he wrote to Chancellor George Osborne to highlight the serious issues with supply that lie ahead and enclosed a “case for reform of fuel taxation” report, which is the government’s only tool to directly keep fuel prices, which are undermining economic and social recovery, from rising too high. The group is due to discuss the problem with Treasury chief secretary Danny Alexander later in the month.
Meanwhile, the UK isn’t the only country suffering from a rise in petrol prices. There are concerns that petrol in Australia will rise to nearly AU$1.60 a litre in just weeks due to the instability in the Middle East. Fuel is slated to rise by up to 14 cents a litre in some states.
