OFT to look into Fuel Prices by carlpenn

Received this in an Email from Fair Fuel UK today:

At 11.00 am today, the Office of Fair Trading (OFT) has announced that it will be asking for evidence on the following issues. It's the number 1 item on BBC's 6.00 pm news. We know that these are questions that have caused massive concern to you, our supporters:

• Do pump prices fall quickly enough when the Oil price falls?

• Are there areas of the country where people are paying too much because there is no effective competition – particularly in remote rural areas?

• Are the Oil companies and big retailers like supermarkets playing fair?

Petrol prices rose by 38% between June 2007 and June this year, and diesel prices went up by 43% over the same period. This positive news to investigate fuel pricing would not have been possible without the great body of FairFuelUK supporters across the country adding their voices and signatures to the clamour for action.

Let us see what they come up with.........

Fitted Electric Memory Seat, Leather Cubby Lid, Wood Dash, Message Centre.

Posted 06 Sep 2012, 07:11 #1 

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Don't hold your breath.

Posted 06 Sep 2012, 21:44 #2 

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I look at petrol prices everytime I go and get petrol, but they still seem to go up! - Don't see the difference here.....
Regards, Bill


Posted 07 Sep 2012, 08:11 #3 

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Sorry if this is lengthy, but the subject matter is massive in useful consideration, accordingly I have attempted brevity, without distortion to technical clarification. Firstly, there have been 3 investigations into the 'Supply of Petrol by Wholesale' via the MMC (Mergers & Monopolies Commission) in 1966, 1976 and 1990. In '66 some objective findings surfaced. The 'de facto' oil companies strangle hold, by cornering the market with strategically placed 'company owned' sites was uncompetitive, and acted (by the largesse prices they paid for such outlets) as a 'barrier of entry' to others. Also the terms and conditions impressed upon the tenant operators of such premises, was questionably a surfdom and needed overhaul. The independent dealer market was similarly viewed as unfairly shackled by '50' year supply contracts, relegating them into long term uncompetitiveness, with no consideration to prevailing market conditions.

The companies were required to partake in '27 undertakings', given to the 'Board of Trade' in 1967, essentially liberating 'tenants' and granting them some security, through a voluntary 'Code of Practice', this instrument of appeal invigilated through the OFT. In turn dealers couldn't be tied for more then 5 years, with their own articles included in the above structure. None of this was legislated by 'statute', but relied upon everyone playing fairly. History has shown this to have been seriously ineffective. In the UK there are two legal codes running in parallel. Firstly statute law, where trials are held to determine whether the terms, as passed by parliament, have been breached. Secondly their is a 'Court of Equity'(or Chancery), where what is deemed as 'fair & reasonable' shall be determined by a judge. In reality this legislation has been found to better suit the pockets of major corporations, deterring originating suits by their small fry plaintiffs.

The Oil industry in the UK, is a byzantine structure - terminologically, a 'Vertically Integrated Oligopoly', and operates formatively by the Refiners 'transfer pricing' product from their 'Upstream' activities, (Exploration and Production), 'Downstream' to refining and marketing subsidiaries. Effectively the downstream market loses money through such actions, whilst Upstream is heavily positive. A spin off benefit to this formation aids in assuaging claims that consumers are being 'ripped off', as the 'we earn nothing from petrol etc.' fable perpetuates. In reality the Holding company balance sheets skillfully obfuscate these practices and the tax offices officiating, are usually disinterested in detail and in most cases offshore anyway.

The '76 Commission added extra legislation to justify the expenditure, and the companies respectfully kept to their side of the 'Code of Practice' and the 27 undertakings..

The 'all change' came with the 1990 investigation, when the monetary Thatcher regime's MMC, found that 'Despite there being a 'complicated market structure, it didn't adversely effect the consumer.' An amazing finding to many of it's participant 'expert' witnesses, of which I was one.

The refiners took this proclamation as an all clear to manipulate the retail market with 'Price Support' (a conniption to fix regional pricing at the pumps) by agreeing a 'guaranteed margin' with retail operators. Effectively the refiners were making the retail price, but legally - of course, as it was the retailer who physically 'set' the pump price.

Mobil who had the problematically configured Coryton refinery, started selling excess petroleum production to ASDA - who promptly used it as a loss leader. Gradually Tescbury's' et al joined, buying 'Spot Market' product - from herein the Majors lost their control and domination of the retail market. Increasingly they disinvested their 'Company Owned' portfolio's, merged with mutual benefits and have generally retreated to the fortress of upstream security. The corollary to all of this has seen the closure of 1000's of petrol stations and an increasing dependence upon large refiner owned outlets and the exponential 'Grocers'.

Crude v's pump prices is an almost impossible trail to unravel with the refiners. They can produce forests of statistics and each participant has varying indices of storage, resource and production cost etc. Whilst they are in competition, and fiercely so 'Upstream', they are surprisingly co-operative with each other downstream. For example there is a 'jointly owned' pipe line running the length of the UK. A backbone artery, efficiently allowing individual refineries to transfer product between each other and distribution terminals.

Whilst bashing 'big bad oil company' may be popular and a vote winner, don't expect this 'laissez faire' government to go beyond anything other than a talking shop, full of Sir Humphreys on a jolly. I believe it's just a smoke screen to deflect anger from the exchequer's revenue stream, onto the broad backs of international giants. Politicians, v's Oligopolists, a sort of offset between Kimodo Dragons and Crocodiles. They both bite, one leaving you to expire slowly from poisonous mucus, the other gaining nutrition via synchronised family participation.

Posted 07 Sep 2012, 12:29 #4 

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Bermudan 75
A very lucid and interesting post, as per your usual standard Martin. :thumbsup:

Posted 08 Sep 2012, 09:50 #5 

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Thanks Mike,

It was my job for many years, and awakened many memories writing it, including my phone being tapped!

Posted 08 Sep 2012, 10:55 #6