11 comments on UK Petrol Prices
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11 comments on UK Petrol Prices
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I'd be interested to know what the pump price would likely be if the crude price hits, say, $200 per barrel. My guess is about £1.60 or so - which would force many economies, but I can't see as being utterly devastating (unlike the effect that price would be in the US).
Which means that the UK will be able to afford to import oil - for as long as there is oil available to import, which may not be for that much longer, if Westexas is right.
We can make a guess.
In Oct03 the average price of oil was $30.35 (link), £18.17 (1Oct03 exchange rate) in the pounds of the day which lead to a product price of 22.09p (based on 81.3p sticker price).
In Apr06 the price of oil was $70.16, £40.32 (1APR06 exchange rate) which lead to a product price of 33.41p (based on 94.6p sticker price).
From that, ignoring the lag effect, we can say that $200, £108.70 (today's exchange rate) oil might produce a product price of 61.39p which would lead to a sticker price at the pump of 127.48p.
The tax take would also have risen by 4.90p per litre so maybe duty could actually be reduced by almost that amount taking the sticker price down to 122.58p whilst maintaining the same tax take per litre.
Anyway, using 127.48p/litre at $200 might only increase petrol prices by 35% from their Apr06 levels. Based on this and the low price elasticity I don't think petrol price will directly be the thing that reduces driving in the UK. The same calculation in the US would more than double the price at the pump.
Someone check my numbers?
I get more or less the same numbers using the same relationship in product price rise v oil price rise as occurred between Oct 03 and April 06.
However there is a disproportionality between the oil price rise and the product price rise. Between 03 and 06 the oil price increased by a factor of 2.31, but the product price increased only by a factor of 1.51. I would assume that is due to the other costs of refining and delivery only rising by the normal amount of inflation. As the oil price continues to increase by a greater amount than the other costs, it will have a more direct effect on the price of the delivered product.
In the worst case, if the product price maintained the same relationship to oil price when the oil price reaches $200 as in Apr 06, product price would reach 95.24p, and pump price 167.25.
It's interesting, perhaps sobering, to see so clearly spelled out, Chris, that when the price of crude doubles I won't actually need to alter my driving habits very much. The price of domestic heating and electricity is, I suppose, much more sensitive.
The cost of fuel before tax includes many oil and energy intensive processes i.e. transport costs, and all the infrastructure of oil production from bit to car fuel tank, plus making the cars, and maintaining roads. These costs of motoring will all rise too. These cost rises will curtail car use. The rising cost of steel has yet to feed into retail car prices, but it must do soon.
Farming and fishing have no fuel tax either.