2022 was a crazy year for fuel prices. The fallout from the Russian invasion of Ukraine has resulted in some huge variations in daily prices at the wholesale markets, with all product prices now substantially higher than 1st January 2022.
For many British former users of gasoil, this has been a double whammy, as they have had to stomach overall fuel price increases alongside the imposition of fully dutied “white” diesel replacing “red” diesel.
Despite these price increases, we have seen that sometimes gasoil or kerosene-based boilers offer a much lower cost solution than mains gas renewal terms (we have saved one user circa £200,000 per annum by switching to a fixed-price kerosene product compared with their best gas renewal offer). If you use gas for industrial heating, it’s probably worth checking whether your boilers can also fire on gasoil or kerosene. It might even be worth looking at investing in a new fuel oil boiler to replace gas.
We have yet to see the full impact of the banning of Russian-origin diesel and petrol from the EU due to be in place from January 2023. Despite most UK suppliers having switched almost entirely to non-Russian cargoes, there is still heavy trading on the European markets of these products.
Consequently, UK-supplied product is trading at a substantial wholesale premium to the rest of Europe, but come January, European suppliers will be replacing Russian fuel with stocks from the sources already used by UK suppliers, with the inevitable supply/demand impacts.
There is continued pressure on the pound as the UK battles with its fiscal position. Any decline in value against USD has an immediate inflationary impact on fuel supply (wholesale fuel prices are almost universally quoted in USD per tonne).
We have been regularly reporting a general trend for UK retail pump prices to be at significantly higher profit margins than prior to the Covid pandemic, but that has included some illogical swings and huge market variations. For example, we have recently observed (in early November) average UK diesel pump prices at very high margins above wholesale. Conversely, in parts of north-east England, prices at some pumps were below the current wholesale price!
All in all, it is a very confusing picture as we head into the new year. The ERA fuel team can’t influence the international wholesale price, nor the tax policies of governments, but our expertise helps clients ensure that they are obtaining the very best value for money in fuel procurement.