The double impact of the pound weakening against US$ and global oil prices strengthening will cause pump prices to move sharply upwards. That’s the view of Brian Madderson, Chairman of the Petrol Retailers Association (PRA).
Madderson said: “The pound has now fallen by over 15% to U$1.24 since the pre-Brexit level of US$1.47 and dropped even more alarmingly last week to just US$1.15 in the ‘flash’ trading, which started in Asian markets. Fortunately, it recovered quickly, but there are City analysts talking about even lower levels to come, including parity with US$.”
The PRA boss went on: “At the same time, renewed talks about trying to curb oil production have led to a hardening of global oil prices with Brent Crude passing the psychological barrier of US$50/barrel. As a result, Platts wholesale costs to retailers have increased by over 6ppl for petrol and 7ppl for diesel in the last few weeks, whereas the UK average pump prices have moved up by less than 2ppl for both grades over the same time period. Thus motorists can expect increases of up to 4 or 5ppl by the end of the month, unless there are favourable corrections to the exchange rate and to global oil prices. This will also increase UK inflation rates.”
The PRA has written to the Chancellor advising that the Government should support the economy in the face of such fuel cost increases, by reducing Excise Duty in his Autumn Statement from 57.95ppl to 55.00ppl. The organisation says this would ensure that consumer spending does not start to fall away and damage business prospects. This is especially the case as the new Government grapples with the aftermath of Brexit.