Towards the end of September, we saw a huge drop in the Brent Crude oil price which reflected a drop in global demand and financial uncertainty across key areas. Within just a few days we had to revise our commentary as conflict broke out between Israel and Hamas. Despite the volatile macro-economic environment pump prices remain quiet.
What’s impacting Oil prices?
Despite a significant bounce back, global oil demand is not yet back to pre-Covid levels. We’ve written several times about the impact Chinese demand has, but looking West this time, it’s important to note that US gasoline consumption is down 6% and US jet fuel demand is down 9% compared to 2019. As the top consumer of petroleum products worldwide in 2021, this trend has a significant impact on future forecasting.
As well as a shift to EV and other greener initiatives, demand is being impacted globally by higher oil prices. Oil is traded in dollars and the dollar remains strong against several currencies, including the pound making imports more expensive.
There is also concern amongst OPEC+ and traders alike around global financial stability. Central banks still raising interest rates. UK, US, and ECB all held interest rates in October and there are fears the Eurozone is heading towards a recession.
The above though are all slow-moving, long-term impacts which we will no doubt continue to talk about each month. The key short term impact causing volatility is the conflict in the middle east. Although diplomatic efforts are ongoing, there is currently no cease fire or other agreements on the horizon. As such we expect the price of oil will be at risk of significant changes over the coming weeks.
UK Pump Prices
Consumers will have (hopefully!) seen that average petrol prices have fallen wow throughout October whilst diesel pump prices have remained static. However fixed price card holders will have seen significant changes through out the month due to way in which fuel cards are priced
Although chatter around price comparison has reduced, there is still pressure from driving organisations on retailers to lower their prices. However, this piece from the Grocer highlights why independent retailers in particular, may be being called unfairly, particularly when comparing against large supermarket chains which have increased buying power.
From a pump price point of view, it’s likely that fuel prices will remain relatively flat. Whilst wholesale prices are likely to continue to fluctuate, retailers will be under pressure to avoid being seen as profiteering. Keeping prices consistent will help to balance those pressures.
For fixed price fuel customers, the outlook is less clear. As fuel cards are more closely linked to the fluctuating wholesale market, we expect to see prices seesaw throughout the month. Follow our social channels for an update each Thursday on the expected change.