Tuesday, 16 March 2010
Petrol price home truths: the sickly Pound
You may have seen the Daily Telegraph this morning going big on Petrol prices about to reach a new all-time high. The likes of them and the AA and other commentators have pushed this as the result of speculation and oil company profiteering.
Its cause is neither of these two factors. In fact, oil refining has been losing money for the majors for over a year now, with negative prices for cracking oil; this is due to large overcapacity in Europe and when people try and shut down plants, like Total in France, they get strikes and Government intervention.
So the real cause lies in Oil having appreciated in price by from a low of $30 to today's $78 price, but more importantly, as the graph shows, the collapse of the Pound since the Economic crisis began.
As you can see the Pound is now lower in real terms than at any time in the past 30 years. Lower than the 1985 when it was at parity with the US Dollar crisis and much lower than on the ERM exit in 1982.
This is what our Government have delivered, a humbled currency with no prospect of improvement in the near future. So expect the prices at the pump to keep on rising.