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Diesel prices, Press and Government

As you may very well expect in these difficult times much nonsense is spoken and written about Diesel & petrol prices. Yesterday the Government Business and Energy Minister, Kwasi Kwarteng stated that “Garages throughout the UK were quick to put the price up but were slow in putting it down”. Also they hadn’t passed on the 5ppl duty reduction a few weeks back.

Let’s examine those statements made by a Government Minister, who is supposed to be properly briefed and in full possession of the facts!

1. Quick to rise, slow to fall: Is that really true? How does he know that for each garage throughout the land? Garages in the UK have 2 driving forces to contend with. The price of oil on the international wholesale market and competition from other local garages.

Let’s take Garage ’A’. They are in a town that also has 2 rival Garages and 2 local supermarkets with garage forecourts. Supermarkets are usually selling fuel a little lower that main branded garages. If he reduces his price to the supermarket level, the supermarket will just reduce theirs again until Garage ‘A’ is below costs. They can do this because the supermarket forecourt doesn’t have to make a stand alone profit but is there to get customers into the supermarket as can be seen frequently with offers such as “spend £50 and have 5ppl off in the garage”, etc..

Garage ‘A’ is running low on stock and needs to place an order. The issue is that the replacement stock is now 10ppl higher than his existing stock. The supermarkets haven’t yet increased their prices and neither have the other 2 branded garages as they’ve yet to run low. So what does he do? The tanker load will cost him £65000 and they take that money on the day they deliver and what happens if the wholesale price then falls before his rivals have to re-stock? So rather than risk being stuck with expensive Petrol & Diesel that he can’t sell, he holds on a few days and lets his pumps run dry rather than risk losing money. Sound familiar? It happened just a few weeks ago with garages around the UK running low or out of fuel.

Garage ‘A’ needs stock and the wholesale price has fallen. He orders his £65000 worth thinking he may gain extra income for a few days, but as soon as it’s delivered the local supermarkets have reduced their price in a promotion to gain extra market share in their shops, so he must reduce his prices to sell his fuel. No bonus profits!

5ppl Duty Reduction: The Government Minister, Kwasi Kwarteng stated that “the garages didn’t pass it on”. Is he sure about that? Duty is paid when the fuel is invoiced. On the day that the Chancellor announced that decrease the garage stocks were already paid at the higher duty rates, so the garages couldn’t afford to subsidise the Government to the tune of 5ppl., so they had to wait until they re-stocked by which time the wholesale price had risen so the effect was less noticeable, but it was passed on.

The Government: Why does the Energy Minister make statements which he must know to be untrue, either that or he’s none too smart and has lousy advisors! Well, I suspect that it’s to deflect blame for the energy price increases away from the government and to the ‘nasty’ profit driven uncaring oil companies and garages. But let’s look at it another way. How has the Government’s income changed due to the recent rise in wholesale prices.

VAT: Daily sales in the UK average 22,004,218 litres.

On 17 Jan 22 lets say the price was 127.11 + VAT = 152.53ppl – VAT content 25.42ppl

On 16 May 22 lets say the price was 151.88 + VAT = 182.25ppl – VAT content 30.38ppl

So that’s plus 5ppl to the Government….. now where have I seen that 5ppl figure before eh?

Each and every day the Government rakes in an additional £1,100,211 because the wholesale price has gone up, and we pay for that!

If you wondered before why Kwasi Kwarteng, Government Minister for Energy set out to blame the oil companies for the higher prices of road fuel, now you know why and who to blame really!

Fuelcard Frank

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