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Weathering the storm

4th October 2007, Page 18
4th October 2007
Page 18
Page 18, 4th October 2007 — Weathering the storm
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Which of the following most accurately describes the problem?

Predictions of severe weather conditions across the Atlantic have been blamed for diesel price rises, but Chris Tindall discovers that the problem lies much closer to home.

For the majority of haulage operators battling to stay profitable following recent diesel price hikes, the reasons behind these soaring costs is probably of limited importance.

Last week we reported that at 80.78p/lit bulk diesel is just below its highest-ever price, according to the Road Haulage Association (CM 27 September).

The finger of blame was pointed in the direction of the Gulf of Mexico, where predictions of a tropical storm caused 25% of production to be shut down when Shell and BP evacuated workers.

But for those wondering how hurricane forecasts in the eastern gulf are managing to batter the bottom line of businesses in the UK the answer, according to Retail Motor Industry Federation director Ray Holloway, is that they aren't.

"Crude price is not a factor at the moment," he says. "A number of factors have come together: the switch of production to heating oil at the beginning of September to prepare for the winter:and also we are running very tight on diesel due to production problems in European refineries. There's been a squeeze on available pick up."

Continental refinements The UK relies on Continental refineries for almost 75% of its petrol. "The US used to buy our surplus petrol and we would buy their surplus diesel," Holloway. explains. -But now the Americans are switching to diesel in their private vehicles we are not able to buy as much from the States. This means the UK has to import diesel from Mediterranean countries and Russia. Some of this fuel is of inferiorquality so extra money has to be spent on refining it.

In other words the blame for rising prices resides with our cold winters and the fact that no-one is willing to stump up the £500m needed to invest in European refineries to cope with demand.

But the UK government must also shoulder some of the blame as it goes ahead with the threat made in March's Budget to slap 2p/lit on fuel duty this week. Holloway insists the decision to raise duty comes from a desperate need to raise money rather than any environmental pretensions.

A Freight Transport Association spokesman says:" It is very disappointing that, at a time of such turbulence in world oil prices, the government has chosen to impose a further increase in costs for industry and motorists.

"Even at this late stage," he adds, "the government should recognise the extent of the problem and reconsider imposing this unnecessary increase in fuel duty."

The spokesman points out that the rise will increase the annual operating costs of a typical 44tonne artic by £870 to £35,600.

Rising costs Owner-driver Peter Johnson believes it will cost him more than that. "I'm already paying 10p/litre more than I was in January," he reports. "My fuel bill for last year was £34,000. If things stay as they are it will be between L36.000 and £36,500 this year. "It's a horrendous amount of money when you can't pass it on."

Hauliers' concerns have led to the action group Transaction being re-formed;founder-member Mike Presneill has already told CM that it is organising a national protest against duty rises.

Perhaps we should end as we started with another weather warning, this time from Holloway.

He says diesel prices will come down during October after the current shortage dies down.

But unpredictable weather patterns much closer to home than the Gulf of Mexico might dash operators' hopes. "The only thing that's a problem is that we tend to get a cold snap at the end of October and beginning of November." he warns."A cold snap could seriously affect diesel oil prices."


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