Published Thursday 11th April 2019
With Brexit continuing to dominate the headlines, one issue that will have users of Fuel Oils concerned is the fluctuating pound and the effect that this has on the price of petrochemicals.
The pricing mechanism of petrochemicals is calculated in US Dollars (USD) per tonne. Whilst day-to-day trade movements on the world’s petrochemical market effect the UK and international market equally, these movements can be dramatically increased by changes in the sterling’s value against the USD.
The Brexit vote in 2016 caused an 8% drop in the value of sterling, which equated to an overnight 1.7% increase in the cost of a litre of diesel; this was despite a 3% decrease in the USD price per litre. This increase in the relative cost of petrochemicals has continued as the sterling has failed to return to its pre-referendum levels.
Now, having passed the 29th March deadline, the concern is that any further reduction in the value of the sterling will result in a dramatic increase in fuel costs.
This risk is heightened by the recent increase in the % of BIO fuel mandated in Diesel, Gasoil, and Unleaded fuels which are traded at a higher USD per tonne price, as reported previously by ERA.
ERA experience shows us that suppliers in all sectors need no excuse to raise pricing for their customers, and a higher underlying cost of fuel will inevitably lead to higher supplier margins. This was borne out over the New Year when wholesale pricing decreased dramatically, but pump price fuel remained consistent.
An ERA review of your fuel expenditure ensures that your organisation is best prepared for any sharp rises in the UK fuel price, and gives you confidence that you are achieving best value in your fuel purchasing. Contact Duncan Rogers for more information.
About the Author: Duncan Rogers, has expertise ranging from the purchase of heavy oils for Tar-boilers through to Fuelcards for vehicle fleets.
Duncan has also built up a track record of developing innovative solutions with substantial cost savings to meet clients’ logistics requirements.
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