Will Petrol Prices “Rocket” by Christmas?

By Ben Taylor
News entry dated 07th Dec 2016

The last few weeks have been rather depressing for those who keep a close eye on petrol prices.

After four months of price increases, the tail-end of November saw daily averages begin to fall, helped primarily by a supermarket price war – but it seems as if those reductions may only be temporary. (It’s also worth pointing out that a comparison of entire month averages actually showed prices of both diesel and unleaded rising when comparing November to October, albeit by only around one penny per litre).

The national press has certainly been full of doom and gloom on this subject. Reports including this one have suggested that per-litre costs could go up by nearly ten pence per litre between now and the New Year.

So what’s behind all this? The key reason is a decision made last week by OPEC (The Organization of the Petroleum Exporting Countries) to dial back member country’s output of oil. This was intended to push the oil price up and the move did just that, with a barrel going up by 7% in the aftermath of the announcement.

Petrol Prices

Rocket and Feather?

The swift increase in the oil price allowed us to do some analysis on the often-mentioned “rocket and feather” effect on fuel prices.

In case you’ve not heard of “rocket and feather,” it’s the theory that petrol prices rise fast like a rocket when the oil price increases, but fall slowly like a feather when they go down.

While the validity of the rocket and feather theory is hotly debated, we can state that our internal figures haven’t shown any evidence of rocketing prices on this occasion. The average price for unleaded on November 30th, the day the production cut was announced, was 113.9 pence per litre. A week later, on the 6th December, the average was 114.6 pence per litre. Yes, this was an increase – but only to the tune of 0.7 pence per litre on average.

For diesel, the per-litre prices were 116.3 pence and 117.0 pence respectively over the same time period – the same 0.7 pence average increase.

To be clear, we’re not seeking to ignore the fact that oil price rises sometimes quickly affect prices at the pumps, but the analysis of our figures suggest that scare stories about nine pence per litre increases and “overnight rises” were rather sensationalist, and not borne out by what actually happened.

Will the oil price remain high?

In fact, this week we’ve already seen the oil price dip once again before making a slight recovery. With other non-OPEC nations coming across as reluctant to join any production cut, some analysts still believe volatility will continue – and that oil prices will struggle to settle much beyond $50 per barrel.

Another factor worth noting is that with the festive season underway, retailers (i.e. supermarkets) will do all they can drag customers to their stores. If this means sacrificing fuel profit in return for trolleys full of purchased shopping, the chances are the supermarkets will hold back on any significant increases for now.

So while we can’t predict what will happen next year, we’re cautiously optimistic we’re not going to see a real “rocket” effect this side of Christmas. Doom and gloom sells newspapers, but it seems to all be rather over-the-top this time around.

However, as always, it’s essential to shop around. There will undoubtedly be some retailers who push prices up quickly – but our free service and PetrolPrices.com apps will help you avoid them.

Do you believe in the “rocket and feather” theory? Let us know in the comments.

Comments

10 Comments on "Will Petrol Prices “Rocket” by Christmas?"

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H M
H M

Oil prices were dropping for a long, long time before the OPEC decision yet the drop was never reflected, or passed on to the consumer at the pumps. We’ve all know for far too long that it is simply greed on the part of the oil companies, even when Governments ‘freeze’ fuel duty oil companies find an excuse for an increase (as if they need one!) However, let’s also remember the amount we are actually taxed on fuel; Governments are just as greedy as oil companies.

Dave Wright
Dave Wright

I only get my fuel from the supermarkets now, as some of the big companies were always first to put the prices up and seemed most reluctant to reduce them when the price of a barrel of oil came down. One company in particular was Texaco. So I do believe in the “rocket”-“feather” concept.

John Shepherd
John Shepherd
Fuel prices and pricing is little more than a savage joke being trialled out on us Cash Cow motorists. I have always fuelled-up wherever there is an Asda store with fuel on site. There was always consistency between stores within a geographical region. Pretty much the same could be said of the Sainsbury Fuel stations but now there can be as much as 2p/litre store to store and region to region can see double that difference. BP,Shell and some of the independents are really taking the biscuit at present or are their prices the real yard-stick of what to expect… Read more »
cris jordan
cris jordan

Tesco Garage (Esso) Midford Road, Bath, has increased its price twice this week from 116 to 118 a litre

chris henry
chris henry

Is there a reason why prices for premium diesel and petrol is much more in the UK than on the mainland. Difference in Europe is around 5 cents per liter.

david field
david field

Chris Henry– we have amongst the cheapest petrol and diesel in Europe, but we have the highest tax on the fuels. Strip away the tax and no one in Europe has a cheaper base cost. The people who do all the work get little profit, the transport , refining, distribution,and forecourts get a pittance compared to the 70p + a litre taken by the Government.
I think that all the production and distribution costs would leave a fuel price of under 30p a litre!!

Chris Woodward
Chris Woodward
I do believe in the feather and rocket theory and, certainly in the east midlands its effects are very apparent. What is even more annoying , and what does not seem to be raised, is the fact that supermarkets, especially in this area, price their petrol not on what they are paying to buy it on the open market but on what the local market will bear. I assume that for instance Morrisons buy petrol as a company on the world market but the stores in this area ie Buxton. Sheffield, Derby, Chesterfield all sell at different prices, sometimes as… Read more »
david field
david field

My previous comment should also answer the comment from Chris Woodward.

Ian Standish-Leigh
Ian Standish-Leigh

There is a petrol station nR a store, that always had its petrol lower than the stor. yesterday I paid 1.11 3p lower than at the week-end. So far it appears to be going down

Howard Cox
Howard Cox

The reason is simple – the FairFuelUK Campaign. Wholesaler contact told campaign founder Howard Cox threat of their #PumpWatch has slowed expected HUGE hike at the pumps because of the campaign and the threat of 146 MPs who support PumpWatch too. Would be nice if you backed FairFuelUK. Good PR and they have 1.4m active supporters.

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