Petrol Price Falls Are Not Mirroring The Fall In the Oil Price
The AA is calling for a more transparent system to ensure that the price of petrol is publically linked to the price of oil. The call comes as the 'collapse' in the oil price to $118 is not being reflected in the price of petrol, even after recent falls. So what can the authorities do about this?
While it is easy to say that the price of petrol should closely reflect the price of oil this is not always the case because of a number of factors. The oil majors are not able to change their petrol prices on a daily basis and constantly update to reflect day by day changes in the price of oil. A more reasonable request is that at least the trend in both oil and petrol prices are very closely correlated.
One other factor which many people seem to forget is the fact that many petrol supply companies will be buying their oil forward in the hope of capping a price rise as the price moved higher of late. So if they get the call wrong and end up paying over the odds for petrol they will find it very difficult to lower prices too quickly.
This is another area where the authorities are looking to become more involved but the fact that the vast majority of the price at the pumps is made up of tax puts them in a very difficult situation.
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