FUEL COSTS: Here's the inside story

Oil prices have gone through the roof.

Recent increases have been staggeringly rapid and people are often better off buying locally than using precious fuel to save a few pence elsewhere.

Some oil companies have reported large profits, prompting the suspicion that they are profiteering from the situation.

The idea that the petrol stations are also profiteering, however, is incorrect.

Unlike many other commodities, which tend to have a percentage profit (meaning the higher the price, the higher the profit), petrol is generally marked up in pence per litre.

This means that the price has little effect on gross profit.

In fact, as price becomes more of an issue, competition becomes tougher and the garages make less. Offering 5p a litre off means operating at a loss.

Credit card merchant charges, however, are linked to transaction values, which means that as the price goes up, the cost to the garage goes up.

Even more prohibitive are the charges levied by fuelcard providers (one major player in particular, who must remain nameless).

As these approach the point at which it costs garages money to accept them, some (not us, I might add!) are already starting to refuse them.

No wonder over a third of the country's petrol stations have closed in the last ten years.

Diesel nowadays is bound to be more expensive than petrol.

It is cheaper to manufacture, but the government levies a higher tax on it (don't ask me why) and with the detergents added to clean it, the end product can cost more.

The reason it has increased in price far more than petrol is that there is a shortage.

Manufacturers, motoring organisations and governments have long pushed for more people to run diesels, because they are more economical (even though the saving in CO2 is partly offset by their sooty exhaust).

As so many people have switched, there is now not enough to go around. From there on it is simply a case of "supply and demand".

Eventually, the refineries will be modified and biased more towards diesel. Until this happens, the price differential is unlikely to get much less painful.

As for the suggestion that garages pretend to run out of cheaper products in order to force customers to buy more expensive ones, all I can say is that I would never sanction such activity on my own forecourt.

Sitting pretty in all this is, of course, the government.

The higher prices, for which they deny all responsibility, cause people to drive less (one of their stated aims), but the resultant loss in tax revenue is offset by the VAT paid on the higher pump prices.

Heads they win, tails you lose!

Brian Steele

Steeles Texaco

Worthing

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