£3 Rise To Fill Up Your Car With Petrol
Hard-pressed British motorists have again been hit by steep price rises in fuel since the beginning of the year. A double whammy of rising wholesale prices combined with a weak pound has caused an increase at the pumps of 6.2p per litre on unleaded since early January.
Hard-pressed British motorists have again been hit by steep price rises in fuel since the beginning of the year. A double whammy of rising wholesale prices combined with a weak pound has caused an increase at the pumps of 6.2p per litre on unleaded since early January. The average price of a litre of unleaded across the country is now just over £1.38. The cost of diesel has also gone up during the same period, rising 4.78p to a new average cost of £1.45. The petrol price increase means that the average cost of filling up a 50 litre tank with unleaded has risen by over £3 in less than two months.
The situation is being worsened as stock market speculators are turning to commodity futures instead of trading in more traditional stocks and shares. Some other markets, such as subprime mortgages for example, have collapsed while big company shares have been sluggish. The price of fuel on the other hand has continued to rise, making oil futures an attractive bet for stock market speculators. These speculators trade contracts which state that they will be able to buy fuel at a set price on a given future date. If the actual price is higher than this, they win and sell on the fuel at an instant profit. The popularity of such fuel futures speculation is now distorting the market and creating falsely high demand.
To make matters worse, currency speculators have been betting against the pound, causing the value of the pound to drop against the dollar and making it more expensive to buy oil, which is priced in dollars. With the recent announcement that the ratings agency, Moody's, has downgraded the UK's credit rating from AAA to Aa1 for the first time since 1978, pressure on the pound is likely to remain high, meaning that speculators are likely to continue betting against the currency, resulting in imports like oil and gas becoming even more expensive.
The speculation on fuel prices and betting against the pound by city traders are yet more examples of how stock market traders are affecting the everyday life of ordinary people. The government has pledged that it will continue on its cost cutting measures, despite losing the much-vaunted AAA rating. Chancellor George Osborne stating: "Far from weakening our resolve to deliver our economic recovery plan, this decision redoubles it. We will go on delivering the plan that has cut the deficit by a quarter." It remains to be seen of course what the effect of these policies will be on fuel prices in the coming year.
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