(qlmbusinessnews.com Tues, 19th Sept, 2023) London, UK —
UK drivers have been cautioned about an impending surge in fuel expenses as global oil prices hit their highest point in 10 months. On Tuesday, Brent crude, a key price benchmark, surpassed $95 a barrel amid forecasts of constrained supplies. This increase comes in the wake of the International Energy Agency (IEA) expressing concerns that a production cut by Saudi Arabia and Russia could lead to a “significant supply shortfall” by year-end.
Motoring group RAC has alerted drivers to brace themselves for escalating pump costs. Recent data reveals that UK motorists are currently paying an average of £1.55 per litre for petrol and £1.59 per litre for diesel. Since August, average petrol prices have surged by 10p per litre, while diesel prices have climbed by 13p.
Following Russia's invasion of Ukraine in February 2022, oil prices soared, exceeding $120 per barrel in June last year. Prices subsequently receded to just above $70 per barrel in May 2023 but have been steadily increasing since then as producers have curtailed output to bolster the market. In August, Saudi Arabia and Russia, both major oil-producing nations and members of the OPEC+ group, resolved to reduce production.
Concurrently, the US Energy Information Administration revealed on Monday that US oil production from its top shale-producing regions was set to decline for the third consecutive month in October, reaching its lowest point since May.
Saudi Arabia, being a leading oil exporter, is inclined to maintain elevated oil prices to ensure a consistent income stream while it seeks to diversify its economy. However, Western nations have accused OPEC, whose members convene regularly to determine production levels, of price manipulation.
As crude oil constitutes the primary component of fuel, motoring groups have cautioned that petrol and diesel prices could continue to rise. The AA emphasised that increasing prices coincide with reduced fuel efficiency, typically observed due to darker evenings.
Luke Bosdet, the AA's pump prices spokesman, noted, “Drivers have endured a 10p-per-litre increase in petrol costs since the start of August. The only things working in their favour have been the persistence of daylight during rush hour and mild weather, which leads to lower fuel consumption. Those drivers who are beginning to feel happier are those with electric cars.”
RAC's fuel spokesman, Simon Williams, observed that with oil nearing the $100-per-barrel mark, drivers face challenging times at the pumps. He suggested that an increase to three figures would likely raise the average price by another 2p per litre. Nevertheless, Williams warned that “if retailers are aiming to achieve higher profit margins per litre, this could drive the average petrol price closer to 160p.”
Analysts have raised concerns that surging global oil prices could impact inflation rates in various countries. Inflation experienced a sharp rise in 2022 and has only recently begun to decline. Sophie Lund-Yates, Lead Equity Analyst at investment firm Hargreaves Lansdown, commented on the symbolism of oil nearing the $100-per-barrel mark, which is “now being considered once more.” She added that fuel accounts for a substantial portion of overall inflation, making this a challenging development.
The Office for National Statistics (ONS) is due to release the latest UK inflation figure on Wednesday. Inflation has receded in recent months but remains elevated at 6.8%. Households have been grappling with increased fuel and energy bills, while businesses have raised prices to cope with mounting expenses. The pound's recent depreciation may have exacerbated fuel costs, as oil prices are also influenced by the exchange rate between the pound and the dollar, given that Brent crude is traded in dollars.
Saudi Arabia's Energy Minister, Prince Abdulaziz bin Salman, defended OPEC+'s supply restrictions, asserting that energy markets require light-touch regulation to curb volatility.
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