Oil prices have recently been falling, but the cost of petrol has remained close to the record high price set in May 2011. The forecourt industry is arguing that the high petrol prices are still justified.
In May 2011, the cost of unleaded petrol rose to a record of 137.43 pence per litre – the current price is an average of 136.58 per litre. However, since the 18th April, the cost of crude oil has fallen by 18%, from $126.65 per barrel to $103.74 per barrel.
However the figures show that the cost of unleaded petrol has risen by 1.8%, from 134.17 pence per litre to 137.43 pence per litre.
The price of diesel is also close to an all-time high but has not been fluctuating as much in recent months.
The industry group which is responsible for representing independent forecourts has argued that there are other factors which are responsible for keeping the cost of petrol at such a high level.
The industry indicate that the cost of crude oil is only partially related to the cost of petrol. They
suggest that approximately 30% of the total cost of petrol is due the the cost of crude oil. The biggest factor to affect the cost of petrol is fuel duty and VAT which accounts for approximately 60% of the total cost.
Other factors include exchange rates, marketing costs, delivery charges and profit margins set by the suppliers and retailers.
Brian Madderson, from the forecourt industry representative group RMI Petrol, has denied that the industry is making good profits from the sale of petrol. He argues that the majority of independent forecourts only make a profit of between two and four pence per litre or up to £2 for a full tank of petrol.
Mr Madderson points out that whilst this is particularly unsustainable, petrol stations try to rely on having shops, car washes and cash machines to ensure their survival. Often even this is not enough and has lead to approximately 500 petrol station closures per year.
Mr Madderson is also suggesting that the recent weakening of the pound against the dollar has had an impact on the price of oil. This detrimental effect on the exchange rate has counteracted the fall in the price of crude oil because it is priced in dollars.
Earlier this week Asda and Morrisons reduced their petrol prices by 2 pence per litre and some experts are suggesting that there may be some further falls in the cost of petrol soon. However, fuel duty is due to increase in January 2012 and then again in August 2012 due to inflation. As a result, falls in the costs of crude oil could be absorbed and see petrol costs rise again. This time next year fuel duty is expected to increase by 4.6 pence per litre and the RMI group are suggesting that this could add a further 8 pence per litre to the total cost of petrol.