The price of petrol is likely to decline from their record highs due to the cost of wholesale fuel as well as global oil ease, UK motoring groups have declared.
The price of 1 litre of fuel reached PS1.63 on Sunday after soaring over PS1.60 at the beginning of this week.
Diesel was still above PS1.73 per litre, however the AA declared that “wild” pump prices should be stable in the event that global oil prices take off.
However, MPs were told it was an “lull before the storm” of further price increases.
Nathan Piper, head of oil and gas research at the financial services firm Investec and Investec, has said that customers “need to get ready for what could be continued increases in fuel prices.”
Mr. Piper said to members of the Treasury Committee: “If more stringent actions are imposed upon Russia, and five million barrels a day is truly taken out of the market, then oil prices would really have no ceiling.”
He said his belief that UK was self-sufficient with fuel, but it imported a lot of its diesel.
Two-thirds of UK customers use diesel, meaning that diesel could be the subject of most significant price hikes at the pump, he added.
‘PS3 per litre possible’
The Dr Amrita Sen, director of research at Energy Aspects, told the committee that the cost of petrol could increase to PS2.40 per Liter. Also, diesel prices in the range of “PS2.50 – even closer to PS3” were “definitely in the realms of possibility”.
She also said that she was concerned that the UK might follow Germany in taking rationing measures, which have been seen by BP and Shell cut down on the wholesale of diesel to the industry.
“If we need to rebuild stocks over the summer so that we have a buffer over the winter…it is industry that will need to be curtailed and that’s where the first set of rationing will have to come in,” she added.
Mr. Piper declared that the only alternative was that the government release certain stocks of crude oil and petrol.
“But it’ll be industry that takes the brunt of any rationing initially,” said the official. declared.
The AA reported that filling the typical 55-litre tank in a car currently costs PS89.90p per gallon, up from PS68.57 one year earlier.
Prices for oil shot up following Russia entered Ukraine and the cost for Brent crude oil , which is the world’s benchmark for prices that hit a 14-year high in one instance.
In the last several days, cost of oil has slid because worries that European Union would follow the US and Canada in bans on Russian oil have been eased.
Brent crude dropped as much as 8%, and traded at $103.68 per barrel on Monday.
The RAC stated that motorists will have to take on more hikes this week, but said that they “should soon get some respite from pump prices jumping by several pence a litre every day as oil and wholesale prices appear to have settled”.
“The price hikes seen over the weekend are still a result of the oil price rise which began at the start of the month and peaked early last week at $137 a barrel,” said RAC fuel spokesperson Simon Williams.
“As the oil price has now fallen back, we should hopefully reach the peak and start to see prices going the other way to reflect the big drop in wholesale costs seen at the end of last week, subject to no further spikes in the barrel price this week.”
The reason that higher prices at the pump will likely to persist even with declining commodity prices lies in the manner in which retail stores purchase fuel as well as the time frame between purchasing at a set price, and then selling it.
There is a chance that retailers might be reluctant reduce their prices out of fear of getting caught in the event that wholesale prices go upwards.
Luke Bosdet, the AA’s spokesperson for the price of fuel, said the 10.6p-a-litre drop in the cost of wholesale petrol between Wednesday and of last week, and then an oil price drop which resulted in “bizarre price anomalies”.
“In one town this weekend, filling a tank at one forecourt was more than a pound cheaper than directly across the road at another,” he explained.
Mr Bosdet stated that Saturdays were among the peak days for forecourts, and the rush of drivers to stay ahead of any price hikes had increased the demand. This in turn resulted in greater prices at the pump because stations were required to replenish at a higher rate.
A global market
The price of oil is primarily determined by the cost of crude oil, as well as the rate of exchange for dollars since agreements are concluded in dollars.
Russia is the world’s third biggest oil exporter , and certain Western countries, like those in the US and Canada had to suspend imports from Russia due to Russian actions. This means that that demand of oil by other producer has increased which leads to higher prices.
The UK is the only country to import less than 6 percent of its oil from Russia which means that it isn’t so dependent upon Russia to supply its commodities as other European countries are . The UK has announced plans to reduce its dependence on Russia.
However, it is dependent on the worldwide shifts in prices.
However, the price of Brent crude has dropped in recent days due to the easing of fears over the possibility of a European prohibition on Russian oil, as well as in part due to speculation about more supplies might be coming on markets via Iran, Venezuela and the UAE.
The ongoing conflict in Ukraine has raised concerns being voiced by Western nations regarding where their energy comes from.
Secretary of Energy Greg Hands said the UK’s shift to more sustainable forms in energy generation is “an issue of national security” and not only of decarbonisation.
At the event held in London the British capital, he stated: “By switching to cheaper power generated in the UK, for the UK, we will ensure that we’re not dependent on any unfriendly foreign country to keep our homes warm and lit.”
However, Mr. Hands said that the shift to renewable energy sources would be slow but there was the requirement to invest in the production of fossil fuels domestically.
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