After a couple of steady months for fuel prices, July has seen a number of changes happen, causing fuel prices to rise. The past 31 days have seen politicians getting peeved about pump prices, the UK economy hopefully take another small step away from recession and oil prices provide a classic case study of the impact of changing supply and demand.
Fuel inflation falling
In mid-July, it was announced that overall, UK inflation dropped to 7.9%, falling from 8.7% the previous month. Whilst there is still a substantial way to go before the level reaches the 2% target, it is at least moving in the right direction.
The figure though is largely being held up by food and other retail items. The ‘Transport’ element of UK inflation stood at -1.7%, driven by the significant fall in fuel prices following the record highs of June 2022. However, this fall looks like it has come to a sudden halt with prices set to increase.
Brent Crude Oil Price increasing
The Brent Crude oil price has been steady for most of 2023. Prices dropped to an average of $75 dollars per barrel in May and June, a drop potentially exacerbated by an unusually high level of speculative shorting by traders.
However, by the end of July, the price had hit $85 a barrel – a 13% increase and a peak so far for 2023 though far more in line with the average seen Jan – Apr this year.
The cause of the increase can be related back to the classic supply and demand curve. Demand, particularly in China, is increasing whereas supply is being cut by Saudi and Russia. There is an expectation from some that global oil inventories will continue to decline for at least the next year which will drive up prices further. However, there does not appear to be a consensus on how big the rise will be.
UK fuel pump prices July 2023
Whilst the average Platts price of diesel increased a further 3.3p, the pump price saw a decrease of -.6p as retailers were shamed into reviewing the margins they took from fuel.
The spread between the Platts and average pump price narrowed to 12p in July, putting it back in line with typical figures seen in 2022. This is a good sign for consumers as it means that retailers are keeping a lower margin. Fixed price fuel card users may feel their price looks less competitive against the pump. However as we have previously explained, the pump price has no impact on the price of fixed price fuel cards.
In addition, the variance between average petrol and diesel pump prices narrowed to just 1.7p. The lowest seen in over 18 months.
Bringing transparency to fuel pump prices
At the start of the month, the Competition and Markets Authority (“CMA”) released a report highlighting that fuel margins had increased substantially over the past year – a fact that Right Fuel Card has previously pointed out.
As part of the report, the CMA announced recommendations for a “Fuel Finder Scheme” which would force all fuel retailers to provide open-source data allowing customers to compare live prices more easily in their local area.
The CMA did highlight that to push through the scheme a new ‘fuel monitor’ oversight body would be required along with new legislation – both of which would likely take months of development.
It has been highlighted that a service does already exist from petrolprices.com. Although not live, the data is updated every 24 hours. However, the same article reports that the site is only used by a tiny minority of drivers. As such, a new service may have little demand.