Fuel price discussion thread (was ‘chaos’)

[Doobedoo]

You think prices are high because of retailer margin?

Don't forget all their running costs come out of that margin it isn't profit. Price is high because of refining and global speculation not retailers jacking up the prices. And tax of course.

Didn’t say that did I. I said they are making more than ever before by definition of prices being more than ever before.

 

[SDK^]

Didn’t say that did I. I said they are making more than ever before by definition of prices being more than ever before.

ahh right - The price goes up so naturally the retailer must be making more

No it wouldn't that is what retail has run on forever. 3% is actually quite high, but i didnt want to get into that debate as it isnt necessary.

Retailers don't run on < 3%, multiply that by 10 !

 

[muon]

ahh right - The price goes up so naturally the retailer must be making more




Retailers don't run on < 3%, times that by 10 !

No they do. Anyone selling highly commoditised products run on very low margins. Go check what margins supermarkets run on for example.

Also I didn't catch this earlier, but the person that calculated the 5% and 7% margin did it including taxes which is completely misleading. On the pre-tax cost it is much higher as a percentage.

Well they are. Let's take a low average of 190p/litre.

10p out of 190p is 5.26%
14p out of 190p is 7.37%

Low single digit percentages so by your definition the market is acting appropriately.

 

[200sols]

Didn’t say that did I. I said they are making more than ever before by definition of prices being more than ever before.

You know all those increased costs businesses are talking about, they apply to retailers as well. Other businesses are passing on those costs to customers in the form of price rises so why are petrol retailers vilified for doing so? Look at the profits of the oil companies not the retailer if you want someone to blame IMO.

 

[Doobedoo]

Are people deliberately being dense this morning? I assume you all know how percentages work? 7% of 200 is more than 7% of 150 so on and so forth.

 

[200sols]

Are people deliberately being dense this morning? I assume you all know how percentages work? 7% of 200 is more than 7% of 150 so on and so forth.

Yeah but what you are missing is retailer profit margin is not a fixed percentage. So when price was lower retailer margin as a % would have been higher. The days of fuel stations surviving on 3p/litre are long gone.

 

[Doobedoo]

You know all those increased costs businesses are talking about, they apply to retailers as well. Other businesses are passing on those costs to customers in the form of price rises so why are petrol retailers vilified for doing so? Look at the profits of the oil companies not the retailer if you want someone to blame IMO.

That’s a fair point especially if they have given there staff pay rises to help with all the rises also which I suspect they haven’t.

I’m not blaming retailers I was just making the point. We should all be familiar with Shell making record profits, the Government taking in record amounts of taxes, so on and so forth.

 

[Doobedoo]

Yeah but what you are missing is retailer profit margin is not a fixed percentage. So when price was lower retailer margin as a % would have been higher. The days of fuel stations surviving on 3p/litre are long gone.

If you’re using a fixed price as in 5p/litre then fine, when you’re using percentages than that will increase and decrease with the price of fuel.

 

[200sols]

Also I didn't catch this earlier, but the person that calculated the 5% and 7% margin did it including taxes which is completely misleading. On the pre-tax cost it is much higher as a percentage.

Its not misleading at all. Your idea of petrol retailer running costs and margins are like 20 years old. They buy the fuel with tax already paid hence they couldn't pass on the 5p duty cut until they already sold their existing stock.

 

[muon]

Its not misleading at all. Your idea of petrol retailer running costs and margins are like 20 years old. They buy the fuel with tax already paid hence they couldn't pass on the 5p duty cut until they already sold their existing stock.

Margin is always over the pre-tax price. You don't increase/decrease your margin because the tax has gone up or down.

If fuel duty doubled overnight margin doesn't go up. Similarly if fuel duty and or VAT was removed overnight, margin doesn't plummet.

 

[200sols]

Margin is always over the pre-tax price. You don't increase/decrease your margin because the tax has gone up or down.

Then your 'low single digit percentage' margin idea makes even less sense than I originally thought. Peoples always talk about retailer margin in the context of the overall price, not just the wholesale price and that isnt changing anytime soon.

 

[Mekrel]

ahh right - The price goes up so naturally the retailer must be making more




Retailers don't run on < 3%, multiply that by 10 !

It depends on what margin you're referring to, Gross or Operating profit. OP for majority of Grocery Mults is <5% - but obviously this is on turnover in the billions.

 

[touch]

It depends on what margin you're referring to, Gross or Operating profit. OP for majority of Grocery Mults is <5% - but obviously this is on turnover in the billions.

They are not talking about operating profit. The retailer margin referred to is before costs.

 

[Mekrel]

They are not talking about operating profit. The retailer margin referred to is before costs.

The point made was retailers aren't running on single digit margins. They are running on single digit margins - OP is the important measure because you can't just ignore overheads etc.

"Costs" is a generic term - Cost of goods sits above the Gross Margin line, cost such as overheads, A&P etc. sits below. They're both costs, talking GM in isolation is pointless because there are other costs for the retailer that come out of GM.

 

[touch]

The point made was retailers aren't running on single digit margins. They are running on single digit margins - OP is the important measure because you can't just ignore overheads etc.

Yes, I agree. We don't know the exact OP figures but obviously it must be lower than the margins quoted.
So the retailer profit is not what's responsible for the high fuel prices.

 

[muon]

Then your 'low single digit percentage' margin idea makes even less sense than I originally thought. Peoples always talk about retailer margin in the context of the overall price, not just the wholesale price and that isnt changing anytime soon.

Retailer margin % does not include VAT. No one should be talking about it in post VAT terms. Fuel includes a duty but should be treated the same as VAT.

 

[200sols]

So the report is in..

The report finds that:

• The main drivers of increased road fuel prices are: the rising cost of crude oil; and a growing gap between the crude oil price and the wholesale price of petrol and diesel – the so-called ‘refining spread’.
• The ‘refining spread’ tripled in the last year, growing from 10p to nearly 35p per litre.
• Over the same period, the so-called ‘retailer spread’ (the difference between the wholesale price and the price charged to motorists) fluctuated but remained about 10p per litre on average.
• On the whole the fuel duty cut appears to have been implemented, with the largest fuel retailers doing so immediately and others more gradually.

They have now launched a full market study, more in depth.

Review finds cause for concern in some parts of road fuel market

A review of competition in the road fuel market has found cause for concern in the growing gap between the price of crude oil when it enters refineries, and the wholesale price when it leaves refineries as petrol or diesel.

www.gov.uk

 

[b0rn2sk8]

No mention of the sliding value of the £ against the $ in that summary. That has a huge impact.

 

[200sols]

No mention of the sliding value of the £ against the $ in that summary. That has a huge impact.

• Crude oil prices, which reached record levels in sterling terms in March 2022, and have continued to rise since then. The dollar-terms increase in oil prices over the last year accounts for around a third of the rise in road fuel prices (20p per litre), with the fall in the value of sterling in that period adding a further 12% (7p per litre).

 

[MissChief]

So the report is in..


They have now launched a full market study, more in depth.

Review finds cause for concern in some parts of road fuel market

A review of competition in the road fuel market has found cause for concern in the growing gap between the price of crude oil when it enters refineries, and the wholesale price when it leaves refineries as petrol or diesel.

www.gov.uk

So as has been suspected, the oil companies, the owners of the refineries have been massively adding to their profits because they can.