Petrol could hit £8 per gallon by 2009
9 May 2008

Petrol prices could hit £8 a gallon by the end of the year, a leading investment bank has predicted. Oil prices are currently hovering at around $120 a barrel, but "the possibility of $150-$200 per barrel seems increasingly likely over the next six to 24 months," said Arjun Murti, a strategist at Goldman Sachs.The oil price was just $100 a barrel at the beginning of the year, so this would represent a doubling of the price within 12 months. The forecast increase would equate to more than £8 per gallon at the pump for UK motorists, nearly £9 for diesel, and probably trigger repeats of the fuel protests that dogged the government in 2000.Murti attributes the oil price 'spike' to the inability of oil suppliers to meet the increased demand from developing countries. To put the current price in perspective, the price of a barrel of oil at the time of the 9/11 attacks in the US in 2001 was just $20.

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9 May 2008

I have some doubts about whether the oil market is operating in a free manner.

Many recent studies have said current oil supplies are sufficient to meet demand but the price continues to rise.

To me there seems to be a reasonable correlation between falling property markets and rising commodity markets. is this just coincidence or market manipulation?

Much of the money to shore up the property market is coming from oil exporting countries.

Money from speculative investors is moving from property to commodity futures, to the extent that oil companies are dropping previous commitments to diversify into other forms of energy supply

These are strong incentives to manipulate the oil market to suit the interests of large investors. Which sources are telling you that oil prices are bound to rise?

9 May 2008

As diesel is very nearly £6 a gallon where I live, I make £9 only a 50% increase? Still glad I've started cycling to work, though!

Can anyone explain why diesel is now 10p/litre more expensive than petrol these days when it was cheaper a few years ago? Profiteering perhaps?

9 May 2008

I think the price difference maybe because proportionally demand for diesel compared to supply of diesel is higher than it is for petrol. I may be wrong, but the dependence on diesel for commercial purposes may be the reason for the higher demand.

The first comment on this blog was a bit of an eye opener for me. There are so many conflicting and different reports on the oil industry at the moment its hard to work out what is actually the truth. It is perfectly possible that supply is being controlled to push up prices, but then again demand from India and China is so vast at the moment prices were inevitably going to rise, but should they rise this much??? What puzzles me slightly is that we are a rich country and struggling with the price of oil, yet despite their rapid growth, China and India still are not rich are they? So how can they afford the price of oil (Ignore the tax in this country for the sake of the argument)?. One consideration is that low costs are fuelling the growth in manufacturing in China and India, but if oil prices continue to rise will China and India still be such a cost effective place to purchase products from?

Just putting some thoughts on this blog, it would be good if someone working in the oil industry could add their comments.

9 May 2008

I think you're all over analysing it guys.

All markets are driven by ridiculous speculation by braying tw*ts in suits over-reacting to all the little things that go on, and this is being accelerated by the easy availability of information (whether true or false). I used by buy considerable quantities of gas for my employer, and having followed that market very carefully I have seen the effect of braying tw*ts on my employer - instant reduction in profits of >50% just because a pipeline that supplies only 2% of the UK's gas was shut for 12 hours more than predicted, and the market moved up by 15% overnight for both short and long term supply. How on earth is that a reasonable response, apart from a good time to sell previously optioned gas at a huge mark up.

Still don't hear any headlines along the lines of "UK runs out of gas", "China oil supply crisis", do we?

Why can't we get back to valuing companies and commodities by verified facts?

I used to be a capitalist, but now I'm wondering when the revolution is coming, as it's now "sod the people". There are a handful of very greedy people around manipulating the majority's future for their own personal gain. I assume most of us on this website have pensions - it's great to have your single most important investment at the mercy of these idiots isn't it??

9 May 2008

PS - Actual manufactured price of fuel before tax, retailer's margin, etc is somewhere around 25 to 30 p/litre, so if oil price doubles, then fuel price at the pump will not double - tax will remain around 50 p/litre, but VAT will be applied at 17.5% on any increase, retailer margins will not change too much.

9 May 2008

We have a trade deficit, the countries that don't, can't they buy futures in oil? What is to stop things getting worse here unless we change our ways? The surprise I think would be if it the price of fuel only doubles.

Is n't it also the weakening of the dollar and the pound because of our lack of manufacturing as well as the increase of fuel costs?

9 May 2008

Jerry 99 and Pauldalg are bang on about speculators piling in and 'enflating' prices (not just oil, but into corn and wheat) while the speculator herd pile out of property. Can you blame them? Does anyone here want to lose their money by backing a declining market?

What socialist speculator George Sorros taught the British Government (politicians interfering with equal pomposity and disturbing ignorance and public money to 'support' the £pound) was that political intefering in markets is no different to speculators - just politicians don't live in the real world and fail miserably!

Similarly Gordon 'Hash' Browns government (and the American) have backed another dead horse with Ethanol fuel. Throwing good money after bad political interference in the enrgy market has led to the corn, wheat, maze, chicken and any product or animal fed on it rising 30%.

These misguided political twerps can only 'play God' with energy and food markets while they can play with our public money because if it was their own pockets (and huge losses) they'd soon be bankrupt and out on the street (which is precisely where these losers should be).

So what is the 'antidote' to high oil prices. Simple. High prices! The market can play speculation games for a while but eventually the market realises the market is inflated and everyone bets the other way and prices fall. Lesson. Leave free markets alone or you'll lose your money speculating what you 'think' the market price 'should' be.

So before anyone jumps on the usual socialist (green with jealousy) bandwagon to tax Oil Co. profits, price controls of the oil market and these "greedy" speculators spare a thought for the speculators when they start losing their money as many inevitably do. And whatever you do don't let your government try to play God with markets. Because they lose £Billions of our money and the politicians never ever pay the price when they get it wrong.

9 May 2008

"To put the current price in perspective, the price of a barrel of oil at the time of the 9/11 attacks in the US in 2001 was just $20."

And people think the "terrorist" attacks were perpetrated by a bunch of muslims abhorrent of the west...

9 May 2008

[quote Pauldalg]Actual manufactured price of fuel before tax, retailer's margin, etc is somewhere around 25 to 30 p/litre[/quote]

You're out of date here mate. At $125 per barrel(42 US gals/159 litres) that's 78.7 cents or 40.5($1.94:£1) pence per litre. Refining and distribution costs will add another 10-15p minimum. That's 55p or so per litre before tax.

Plus the pound is due to head south against the dollar. UK interest rates will be below 4% by end of this year weakening the pound further.

9 May 2008

I didn't think the Oil market was a free one. There's OPEC who will aim to keep a steady production and prices, so any party (in OPEC, not everyone is) can 't wade into the market with loads of cheap oil and disrupt everyone else. Non OPEC producers can do what they want, but they tend to have more expensive oil in the first place (it's cheaper to bore a hole in the middle east and capture the oil the shoots out than pump it out of under the North Sea).

Yes, the speculators are having an impact, along with developing nations who want more oil. Greater demand means prices rise, unless supply keeps up, and if you have oil in the ground, why pump out more to sell at one price when you can leave it there and sell less for a higher price?

If you need petrol/diesel to earn a living, as most people do (due to poor public transport and/or living too far from your workplace to walk/cycle), then you put up with the prices, and hope to use less fuel. A credible alternative is needed, but doesn't seem to exist yet... If a large number of people could however temporarily use a significantly less amount of petrol/diesel (eg 25 million people in Europe using 25% less for a month) then that would send panic signals to the speculators that the market would crash, therefore playing them back at their own game.


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