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Why is fuel so expensive?

 

THE Office of Fair Trading (OFT) is considering whether to launch a new inquiry into fuel prices.

OFT chairman David Quirk MHK made the announcement in Tynwald after revealing that the average price gap between the island and UK over the last eight weeks had risen to 8.13p per litre for petrol and 6.54p per litre for diesel.

This is far in excess of the differential of 5p per litre that was identified as a trigger for concern in the OFT’s last investigation into liquid fuel prices, which was published in April 2010.

But Mr Quirk said it the OFT had concluded it would be ‘premature’ to launch another Manx investigation until it sees the results of a major review launched by its counterpart in the UK.

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Speaker Steve Rodan told Tynwald it was ‘totally unacceptable’ for price differential to go up to 8.13p per litre and suggested this was actually an under-estimate.

He said figures for average fuel prices in the UK showed the lowest to be in Preston at 129p per litre to the highest in Northern Ireland at 138p per litre, with most garages selling around the 132-133p a litre mark.

‘This shows a stark contrast with the Isle of Man having the highest petrol prices in the British Isles,’ he told the court.

Eddie Lowey MLC suggested the price gap was nearer 10p per litre. ‘The amount of money we are talking about is huge. The laissez faire attitude of the OFT is not acceptable,’ he said.

The OFT’s last fuel price report found no evidence of profiteering by local fuel suppliers.

Click here for our report on the OFT’s 2008 inquiry into fuel prices

It has been monitoring prices since the report was published and has found that on more than 75 per cent of occasions, the gap between average Manx and UK prices for the independent retail sectors had exceeded the 5p per litre mark.

The average gap over that period was 5.98p per litre for petrol and 6.16p pet litre for diesel, said Mr Quirk.

He said the OFT had also noted a ‘worrying trend for prices to rise with the crude oil market price but fall more slowly. This trend was identified and appears to be continuing,’ he said.

Mr Quirk said the OFT was particularly concerned about the failure of the suppliers to react to falling crude oil prices in November this year.

He said his officers had written to both fuel importers to seek an explanation. In both cases, the importers said they had needed to restock when the price was at its near peak and that prices would fall with new deliveries that were imminent.

Shortly afterwards, prices did indeed fall – by 2p per litre for petrol and 1p a litre for diesel.

Mr Quirk said there were two significant influences on the increase in the price gap over the last two years – fuel transportation costs have risen and prices and margins at UK retailers are suspected to be artificially depressed by a supermarket price war.

It’s impossible to say at this stage whether these factors justified the price gap, he said.

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