The Unpredictable Dance Of Fuel Prices

Fuel prices and its large dynamic market are dependent on many factors. Today, it is more than important that we realize how unpredictable it can be. We also must embrace the importance of following daily news, overseas events, and how it might or might not affect fuel price. Something that drives the trucking industry and the US as a country. And after recent catastrophic events, let’s discover what actually makes fuel prices go up and down, and how some lesser-known factors can affect it.

 

Unpredictable Geopolitical Events & Tax

 

From the ongoing US-China trade wars all the way to the middle east’s recent events where an attack on Saudi Arabia oil facilities has destroyed 5% of the world’s oil supply.

 

For the trucking industry, it raises many questions whether fuel prices will go up or not, and if yes – by how much. While it got people worried about a possible leap in the prices of petrol and diesel, it is not necessarily an indicator that the prices will skyrocket.

 

According to Philip Gomm from the RAC Foundation, the biggest thing isn’t what’s going on in Saudi or Iran, it’s the Chancellor of the Exchequer and that’s because around 60% of the fuel price that is paid is a tax. A tax that is a mixture of fuel duty and VAT could be a reason that we don’t necessarily see a jump of the prices at the pumps, even ff the base price of the oil doubles.

 

 

 

 

The Exchange Rate & Wholesale Prices

 

The exchange rate is also an important element when it comes to fuel prices.  Oil is priced and traded in dollars and if the exchange rate is weak it will result in costing more in pounds to buy that fuel.

 

The wholesale price comes into play as well, in today’s dance of fuel prices as it defines how much the oil costs when it leaves the refinery. That will eventually become the price retailers pay for it.

 

When supply is disrupted – such as an attack on an oilfield – wholesale prices go up.

 

The wholesale price is expected to go up quite rapidly, but then again, it will take a couple of weeks for that to get passed on to drivers and affect them directly. But because it is not known how long the supply will remain to be disrupted, it becomes almost impossible to predict how much fuel costs will increase, or for how long.

 

Following Future Events

 

With no signs of a shortage of oil across the globe, and fuel market’s ability to adjust to the loss for political reasons and lessons learned from Venezuela and Iran, the current situation is strongly under control.

 

And the cost of a barrel of oil is soaring since the Saudi attack with a price of roughly $65 (£52.20) a barrel, just proves that as we are still miles off the historic $143 (£114) a barrel in 2008.

 

However if tensions will turn into a conflict in the Middle East, that will tell a completely different story with production facilities, trading routes and pipelines becoming vulnerable to future attacks – which could result in prices jump long-term.

 

 

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Paul Mark