posted 4 years ago

Opinion: Is There A Huge Petrol Price Hike Around The Corner?

Can the world’s oil industry really sustain falling pump prices

Falling pump prices are the best news for motorists in many years, with the cost of a litre of unleaded falling under the £1 mark at The Harvest filling station in Birmingham. This is the lowest price of petrol since May 2009.

This is the combined impact of falling oil prices on the world markets and competition between petrol retailers in the UK, particularly the large supermarkets. 

Shale gas production in the United States coupled with continued output from countries within OPEC – the Organisation of Petroleum Exporting Countries - means that oil supplies are plentiful, suppressing the price that can be demanded for a barrel of oil.

However, concerns are already being raised that falling oil prices are not good for all.

Closer to home, experts warn that the collapse in prices could have a devastating impact on the North Sea oil industry, potentially costing thousands of jobs.

In a situation similar to that which occurred when mining of British coal became unviable, could it be possible that oil extraction in the North Sea might become unviable due to low prices globally? Once the rigs have been scuppered and the skills have gone, restarting production would be very expensive.

Will the taps be turned off?

It is estimated that 85% of new British oil and gas resources are already at the risk of being shelved.

According to data from Goldman Sachs, only one-fifth of the projected production from the 400 biggest new and planned oil and gas fields around the world would be profitable at current oil prices.

The prospect of the taps being turned off globally suddenly sounds very likely.

As recently as December 2014, OPEC said it would stand by its decision not to reduce oil production even if the price of a barrel of oil fell below $40 a barrel.

UAE energy minister Suhail Al-Mazrouei says that OPEC will wait at least three months before considering an emergency meeting of its members.

The price of a barrel of Brent crude oil has already fallen below $50 a barrel and has some way to go before it his $40, but the trend is definitely downwards.

Much depends on whether members of OPEC, who supply 40% of the world’s oil, can stomach lower profits than they have become used to. They are locked in a price war globally and might feel winning it long term is worth some short term pain while they force competitors out of business.

Equally, shale gas could turn out to be a sustainable source of fuel long term.

One thing is certain: Low oil prices are already reshaping the economic map of the world's fortunes, creating opportunities for some and problems for others. This could expose further political tensions which might also have an impact on oil production and trade.

Electric vehicles

Another factor to consider is the growing interest in electric vehicles, which now finally seem to be gaining traction.

However, falling petrol prices could serve to place doubt in the minds of people who are considering making the leap into a Leaf.

In turn, that could deter investment in the infrastructure required for electric vehicles.

OPEC claim that the world’s oil markets will stabilise themselves. Whether that is good for motorists remains to be seen.

But I wouldn’t rush out to exchange the Prius for a V8 gas guzzler just yet!

Photo Credit

Are low pump price here to stay? Is it time to switch to an electric vehicle or go back to a gas guzzler? Let us know.


Why are we made to feel guilty when something good happens like a fall in petrol prices let the feel good factor be long and prosperous

I have been hearing about the potential reduction in fuel prices since Xmas however that does not appear to have happened in Dorset Nottinghamshire or Cambridgeshire that I have seen apart from a 5p reduction after Boxing Day which was raised after a couple of days back to the original price probably so that the paers could announce a reduction in the New Year which amounted to 2p but leaving petrol still above 99p/ltr & diesel 5p above that. This announcement only advises 1 station near Birmingham which is not an overwhelming improvement over the last 6 months so why all the noise & false hope?

Like all fuels up fast and down slow what's the problem we will use more end result more money for the super rich

Amazing,whenever something drops in price,there is always some one to talk the price up again.

N. Chaplin has commented that a further reduction in oil price per barrel will cause both companies and contractors to go out of business. How come? Perhaps Mr Nicholas has forgot that oil prices were once well under $10 a barrel prior to the wars in the Middle East, well over 40 years ago. Back then the oil supplying nations were rich. Now they are 'super-rich', at our expense as consumers. Do not have too much sympathy for oil companies, they are big enough to look after themselves, whilst the contractors are flexible enough to cope with changes of supply and demand for this commodity. Price does not affect them to any great degree. Think of us a consumers of oil, diesel and petrol first. The govt. is sure to move quickly to remedy any price imbalance or loss of tax and duty revenue at the retail pumps. Governments are unscrupulous!

The prices will stay where they are until the UK election is over. then when they have suckered everyone in again they will rocket up with a million and one excuses

I like the way that these people are psychic and states " As recently as December 2015"

Just wondering what would have happened if the Scots had achieved independence having based their entire economic strategy on revenues from North Sea oil?

Low Oil Prices can actually help the North Sea Oil industry. Wages for contractors and engineers are over inflated, so a temporary drop in oil price will actually help these pay rates stabalise. Further Skill and knowledge is not lost when an oilfield is mothballed, it is simply re-directed into other fields. Oil is a global industry, once prices rise, these fields will be re-started and expertise can easily be bought in from abroad. We live in a global age, many UK ex-pats are stationed all over the world, they can be bought back to restart the oil fields. It's not doom and gloom

Another doomed when its up doomed when its down. As the consumer I shall enjoy it whilst it lasts, business can't complain. At least I never heard them complain when Diesel was £1.40+

Responding to Vernon Taylor's comment, how is the government going to loose out on tax revenue ? Fuel duty is a fixed amount per litre and has not changed - that is the problem and it would be fairer if it was set as a percentage. True, there will be some loss to VAT revenue on the reduced pump pricing. However, lower prices are probably more than compensating for this by increasing consumption as motorists start to enjoy more 'leisure' motoring again after being forced for so long to limit journeys to essential only.

The most immediate danger is from the loss of tax revenue caused by the lower pump prices and the government will not stand for it and will need to drastically increase the rate of duty on fuel or recoup the losses by above inflation increases across the board.

The price of crude is of course only a small element of the price per litre at the pump. Gordon Brown was responsible for hiking the duty rates and tried to justify it by saying it was only fair that the duty should keep pace with the then increasing price of crude. Now that crude prices are falling, isn't it again 'only fair' that duty rates should fall? With a general election only months away, motorists (ie almost all of us ) should be demanding statements from all major political parties on their post election intentions for Fuel Duty and VAT. It is just not healthy for our economy to be so reliant upon taxation raised from the motorist. Further reductions in the pump price, as a result now of duty and tax reductions can only further strengthen our economy and help us as a country to earn 'real' money in export markets

Why are we seeing Electric. Diesel and Petrol hybrids? Simple the car manufacturers do not care what fuels their engines they just want to sell vehicles, all vehicles, including commercial. Whether the Governments of the world admit it or not we are moving and the pace is increasing with every new vehicle having a Hybrid option towards a carbon free motoring environment and my bet is the biggest growth as the infrastructure develops is Hydrogen powered vehicles. watch the pace of change accelerate once the already known fossil fuel reserves, currently being refined become depleted. Can Oil Companies produce Hydrogen you bet they can.

Its a finite resource, it will be in demand for some time to come (yes we are all becoming more fuel efficiency conscious . . but this is more than offset by growing demand from emerging economies, China, etc). So yes, prices will go back up. Despite that I still want to keep my ageing very low mileage 4 litre supercharged performance beast - it may only give 20mph urban but worth every penny for the sheer enjoyment it gives. However at some point I will need to get another vehicle for short runs - a 2nd hand small affordable and economical runabout - what would others here recommend?

Osborne can't hike any more tax from fuel with election only months away but he'll disguise it another way..saving the planet or British jobs. OPEC will not wait too long before shutting off teach the west a lesson. It's America that's their target..shale is too cheap for them. Is Big Oil UK now storing today's cheap fuels to keep prices low for longer? NO. Will Osborne ( or Balls )allow drivers to get away with today's prices after the election? NO. Both Gov UK and Big Oil will jack up prices as soon as they possibly can. We have only 2 months of cheap fuel left at best.

I'm with Tim Stubbs, buy a V8 and enjoy your motoring. When you calculate the differences particularly when buying a second-hand V8, you really need to be doing a massive amount of mileage to justify a Leaf, or even a diesel (I like my diesel - but I loved my V8) You can buy a great Jag XK8 V8 Auto for under £5000 and the only spanking you get is on the RFL. I didn't buy it for long runs but I often just got in it and did a 20 mile cruise around my local country lanes. It depends what type of motorist you are - not sure why village dwellers in their 80s buy a Leaf or any of the main stream electric or bi-fuel cars at huge premiums and then do less than 2000 miles a year. A friend of mine was recently told by a main agent she shouldn't buy a diesel Vauxhall because she didn't do enough annual mileage for the CAT to heat up and burn off the carbon (I think that is what they said) and I agreed - she loves the smoothness of her petrol Corsa SRi. Work out the figures!

In a word, No, there will not be a huge hike in the price of petrol. Huge amounts still left in the ground that can be tapped by conventional means and huge amounts of shale oil easily extracted. North Sea oil extraction may decline given the difficulties of the environment but that is all. I bet Scotland is breathing a huge sigh of relief now since their economy would have been destroyed since it would have been built primarily on North Sea oil revenues. That has put paid to Scottish independence for a generation.

After years of ripping off the motorist, the oil companies finally got stung. Always ready to up the pump prices at the mere whiff of barrel price rises. Not so quick to drop them again when crude oil falls. The UK forecourts always seem to be able to afford refurbishment on a regular basis though. Why?? I don't care about the latest lights in the garage canopies, I just want reasonably priced fuel.BTW, I run a Toyota Prius.

"Electric cars are fundamentally more efficient." I don't know where you get that from? It's complete rubbish. A power station is about 35% overall efficiency; ie. the conversion of energy in the fuel to electrical output. An internal combustion engine is about the same, The losses in an electric vehicle are about 5 to 10%, so on balance they can not be more efficient than conventional petrol/diesel engines.

It is of course conceivable that OPEC could manipulate the world oil supplies, by reducing well output, despite the assurance given about the $40 dollar threshold per barrel. Oil dependent nations as suppliers of the commodity for revenue are in a fix at present. Demand is unlikely to increase again significantly, at least from the western nations, as vehicles are becoming far more economical through technical and engineering advances. Are we about to see petrol and diesel prices below £1 a litre at the retail pumps? Such a reduction to the cost of living for most families would be most welcome

The price of the petrol as it is nice, but now should stay as it is, before it destroys many companies and contractors contracted to them forcing more job losses. It will not make the North Sea oil viable and it will shut down if oil prices continue to spiral down.A drop in the price was good for us and industry in the UK, but it will b dangerously low if it continues to fall.

Just wait!! government will hike up tax and when the industry recovers we will all be out of cars overnight. The UK government can't afford to lose the revenue they have and not pay back the so called deficit. As for electric cars you only have to look at the cost of the battery once it's has hit it's max charge cycles. Second car price will be much less than the value to replace causing many cars to be scrapped and that's without replacement engines etc. As for gas guzzler - I have a BMW 650i and it returns 22mpg with spirit driving or 30-32mpg on a run. 4.8 litres and mighty performance which returns similar to a spanked family petrol car. I know what I would have and mine makes V8 noises.

Electric cars are fundamentally more efficient, som five times more. fuel burnt in a power station and the used to charge a battery liberates at least four times more energy in the form of motive force. So if the world's ICE's were replced with electric then only a quarter of the fuel would be required. That's the fundamental dfference.

Electric cars won't help. Energy is energy, and whether it's burnt in an IC engine, or a power station, it all comes from fossil fuel.

Its the basic concept of business. Cut your price and wait for the opposition to match you; they can't; they fail; you win and hike the price as the sole supplier. Happens all the time

By all means save for a Leaf if you want to buy the modern day equivalent of a Betamax Video Recorder. However if you want something that won't go the way of the dodo in the next 2-3 years save up for a Toyota Mirai.

Oil prices will go up but not soon. The Saudis are pumping crude with the objective of putting the shale oil businesses under pressure with the objective of driving them out of business, as well as putting pressure on the Russian economy. They certainly will not be able to offer the level of sweeteners that they have to date, but they will achieve efficiencies, and when their technologies are shown to be safe, then these sweeteners will be unnecessary. After a few years (probably 2-3 but up to 6 years) the Saudis will reduce supply and prices will increase again. The electric car industry will progress more slowly than it would have done under a higher oil price scenario, but will develop even cheaper battery technology and thus ensure a more profitable future when oil prices return. However, all of this could change again if there is conflict in the ME, and who knows what might happen after last week's murders in Paris.

Of course prices will go back up. There's only so many sweeties in the jar kids! Falling prices are just a symptom of a failed market not a change in the underlying, fundamental reality that we will use up all the oil one day. I'd start saving for a deposit on a Leaf and put some money into renewable energy companies!