More oil wont mean lower fuel price

By FWi staff

FARMERS can expect little relief from high fuel costs this season, despite a decision by oil-producing countries this week to raise production to control spiralling crude prices.

Meeting in Vienna on Wednesday (21 June), oil ministers from the Organisation of Petroleum Exporting Countries agreed informally to pump an extra 710,000 barrels of oil a day.

That represents a 3% increase, and was expected to be ratified at a later formal session.

But industry opinion suggests about 1 million more barrels a day were needed to take the heat out of the market.

Oil prices have rocketed in the past 12 months.

Brent crude has averaged about $26/bl this year, compared with $18 in 1999, and was hovering around $30/bl on Wednesday, the highest level since early March.

The weakness of the Pound against the Dollar – the oil currency – has exacerbated the effect on UK farms.

Crude oil prices are ridiculous.

“The amount of extra production being talked about will have almost no effect, says John Mackin, regional sales manager for fuel supplier Total Butler (Northern).

If the Pound suddenly strengthened a few points against the Dollar, then agricultural diesel prices might start to fall, but only by fractions of a penny.

Red diesel prices stand at about 17-20ppl, depending on volume and payment terms.

Farmers who were paying 13ppl a year ago will be paying a lot more this year, he predicts.

The price of derv has also jumped, typically by about 14%, to almost 57ppl before VAT.

That has added more than 3,000 to the running cost of a typical 38-tonner, says John Hix, campaign manager for the Freight Transport Association.

Petrol at 86ppl is now commonplace, up from 75ppl a year ago.

Unless prices ease quickly, many farmers face ruin, says Bob Parry, president of the Farmers Union of Wales.

He describes current levels as scandalous, and has written to the Chancellor demanding a cut of at least 10ppl in the duty levied to bring UK prices back to those in Europe.

Rocketing fuel prices make it impossible for us to compete with Continental producers and they are strangling the life out of rural Wales, says Mr Parry.

Pembrokeshire farmer Meurig Raymond says transport cost inflation threatens the future of many producers in western Britain.

Increases in charges for diesel, road fund tax and insurance may not be shown on an invoice.

“But they contribute to the cost of everything we use, and reduce what we get paid when our milk, arable crops, cattle or lambs are shipped east.

I estimate that higher transport costs will knock 10,000 off the top line of our balance sheet this year.

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