Measurement and Testing
How the Saudi Attack Affected UK Oil Prices
Oct 23 2019 Read 247 Times
Following recent drone and cruise missile attacks on Saudi Arabian oil facilities, British motorists were hit with a reactive 5p increase in petrol prices. The drone strikes targeted major oil production facilities and wiped out 5% of global crude supply, which triggered a sharp spike in prices around the world, including the British market.
Assurance from Saudi Arabia helps to stabilise prices
Initially, news of the attacks pushed up the price of Brent crude by a huge 20% at the start of trading. While at first analysts warned petrol prices in the UK could hit £80 per barrel as a result, assurance from Saudi Arabia that facilities would be "fully back online" within a matter of weeks helped to push prices back down.
The statement from Saudi Arabia, combined with major oil storage facilities operated by Saudi's Aramco, meant the impact on exports was nominal. As a result, prices quickly dropped by around four US dollars a barrel. This is excellent news for British motorists, as the AA initially warned the attacks could have forced average pump prices to hit the highest levels seen since October 2013.
AA and RAC accuse retailers of withholding savings
While the initial kneejerk reaction to the attacks has eased, the AA warns that the savings may not be passed on to motorists as quickly as they should be. “Our fear, other than an escalation beyond the attack, is that retailer and supplier margins at the pump get even bigger as they pass on cost increases but take a long time to pass on savings from the fall in the wholesale price," says a spokesperson for the AA.
There are concerns that British petrol retailers are using the Saudi oil attacks, as well as recent fires at production plants, as a "smoke screen" to rob motorists of savings of up to 4p-a-litre at the pumps. While the RAC confirmed that average prices for unleaded dropped by almost 1p a litre in September, the savings aren't in line with the larger drop in wholesale prices.
"The saving in the wholesale price is not being passed on at the forecourt, with retailers potentially thinking drivers would just be grateful that prices have not shot up after the supply disruption," says a spokesperson for RAC Fuel Watch.
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