Inflation, and exchange rates
In the past month, we’ve seen a true cocktail of factors occur within the economy. Although not as tasty as these five options.
UK inflation remains as sticky as the chicken wings from my local Chinese. Many forecasts expected (hoped…?) to see it decrease sharply in May but CPI inflation remained steady at 8.7%. This resulted in yet another interest rate hike to 5% - a level last seen in October 2008!
Source: https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate
Whilst those of us with mortgages continue to grow more anxious, the interest rates provide for a interesting opportunity for foreign investors. This in turn has led to the pound gaining ground against the dollar – which we all know now is a positive when considering oil prices.
Oil Prices
Unlike the UK economy, the oil markets remain quiet. The average daily closing price dropped slight from 75.69 in May to 74.98 in June. A fall of just 1.3%. The steady pricing is largely due to muted supply and demand forecasts. If prices are maintained at this level, it should, in theory, be a good thing for customers. We may not see drastic falls at the pump, but we also won’t see the dramatic increases of 2022.
What happened at the pumps in June 2023?
Unleaded petrol prices have remained largely stable throughout June with a modest 2p per litre drop on the UK national average price. However, the diesel price dropped diesel dropped a further 7.4ppl reducing the difference between petrol and diesel back to an average 2.2ppl in June, the lowest spread seen 2021.
The falling pump price also meant a reduction in the spread between the Platts wholesale diesel price and the pump. Between Jan – Nov 2022, this spread had averaged 10.7ppl. However, between December 2022 and May 2022, the spread more than doubled to 22ppl as retailers appeared to keep back an increased margin. By the end of June, the spread between Platts and pump for diesel was just 13.32ppl.
How does the decreasing spread between Platts and pump impact fuel card users?
As spreads start to close, many customers start to question whether a fuel card remains a worthwhile option as their “saving” starts to decrease. Take this example:
Scenario 1: The wholesale cost of the diesel, including the fuel card operators fee is 130ppl. This is what the customer is charged. The pump price is 142ppl – a ‘saving’ of 12ppl.
Scenario 2: The wholesale cost of the diesel, including the fuel card operators fee is 130ppl. This is what the customer is charged. The pump price is 135ppl – a ‘saving’ of 5ppl.
In both scenarios, the cost to the customer is the same as it is dictated by the wholesale fuel cost and the fuel card operators’ fees. We know that customers can feel like they’re not getting as good of a deal due to the pump price changing. However, the pump price is impacted by more factors including the retailers’ costs, when they bought the fuel and the margin they choose to keep.
Whilst savings may sometimes be small, at Right Fuel Card we’re confident that our customers would normally pay more at the pump. Plus, by using a fuel card, customers benefit from the simplified admin which comes from weekly invoicing instead of having to keep individual receipts.
Right Fuel Card, like other Fuelcard resellers, have no control over the wholesale price of fuel - we wish we did. Our revenues come from litres of fuel sold, not the total cost of fuel, so we're always keen to see lower fuel prices and ensure our customers are on the road in the most cost-efficient way possible.
We offer a wide range of fuel cards that are designed to save you time and money. Use our quick comparison tool to find out which fuel card is best for your business, or alternatively, you can contact our team at 0113 202 5110 and we can discuss your options further.
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 | Jen GreenJen has extensive experience across a range of regulated industries. Her research on the monthly market movements for oil and how they will impact prices at the pump has been featured in numerous publications, including the Transport Operator and Fuel Oil News. |