Fuel hike looms after OPEC cut

By Tamarind Davidson

FURTHER fuel price rises are looming, following last weeks decision by exporting countries to cut production by 5%.

The 1.5m barrel-a-day reduction by members of the Organisation of Petroleum Exporting Countries starts from 01 February.

It was prompted by recent falls in oil prices and the fear that prices could collapse once demand falls in the spring.

After a surge of $1.43, to $27.1/bbl just after the news broke, Brent crude values eased back to $26.4.

But fuel prices have already risen. Red diesel has edged up by 0.5p since the announcement, to about 20ppl, says John Ringwood, product manager at co-op ACT.

“Prices will gradually keep moving up through February and will probably reach a peak of 22-23ppl.

“This is still lower than the 28ppl in the autumn, and is only likely to be a short-term rise. Once demand falls in mid-March values will start to drop back to current levels.”

Mr Ringwood is advising customers to buy now if they can. “A saving of 2-3ppl can be quite considerable when purchasing 4000 litres,” he says.

“Bulk derv prices are also likely to rise by the same margin, but an adjustment on the forecourts in less certain.

“Oil companies will want to put it up, but politically it may not be possible – they are very sensitive about their image.”

The extent to which farmers are affected depends on how quickly increases are passed down the line, says the NFUs technical director Andrew Opie.

“A rise is not certain, but any increase in the oil price rapidly triggers a rise in red diesel, because of the low tax.

“Farmers suffer quite badly when fuel values rise, as it is not just haulage rates that go up, but other less obvious costs.

“High fuel prices remain a key concern and something that the NFU is actively pursuing.”