Dear David: day TWO to SIX of 20

Posted on December 10, 2012

Day SIX of TWENTY: more freezing temperatures forecast

As we go into the penultimate week before the Christmas break the temperatures are biting and rural life gets that little bit more difficulty than urban life. Often requiring our own personal supply of rocksalt to even get off the drive to go to work, many that buy heating OIL suddenly panic and put in an order that they simply don’t need. This is a disaster for those that really do need their OIL now and creates potential supply issues.  All the groups that we run were prepared and we put their last orders of the year in through November. But those not lucky enough to have heard about how to buy their OIL as part of a buying group do not have any direct source of information like that.

So with kerosene’s wholesale price dropping today for the 6th day running, perhaps we have found the reason many suppliers have never ending escalating prices? Could it be because many have come to the market late, with a little bit of panic and feel that they have to pay whatever it is they are asked and the suppliers know it?

David, we need some answers rapidly.

Keep warm!

Chris Pomfret

Dear David: day FIVE of 20

Posted on December 9, 2012

Day FIVE of TWENTY: the numbers simply don’t stack up

The numbers below show it was a massive week of price changes for crude OIL related products:

  • Brent Crude OIL:  down 3%
  • Home heating OIL wholesale price: down 3%
  • Unleaded petrol in Oxon: down 2ppl
  • Heating OIL across GB:  up by as much as 15ppl – that is 25%

These numbers simply do not stack up. It is unfathomable for suppliers to be ignoring both the market indicators and their customers needs in such a dismissive and unaccountable fashion.

David we need an explanation as to why the price of heating OIL has escalated so dramatically, we need answers to questions that were never fully and transparently answered two years ago, we need to know that this spike is now over and, finally, we need to when prices will once again track the wholesale price and rapidly fall.

If this is not embarrassing enough for the industry in GB there is something else we should take into account. I receive daily price updates from Northern Ireland – where nearly 70% of homes use heating OIL. The prices over there are generally a little higher than in GB. However, on Wednesday the 5th December the price fell from 60.5ppl to 60ppl. Then yesterday, on Saturday 8th, the price fell again to 59.6ppl. How is this possible in the same week that the prices in GB simply went berserk?

The government need to take action now.

Keep warm!

Chris Pomfret

Dear David: day FOUR of 20

Posted on December 8, 2012

Day FOUR of TWENTY: this is deeply disturbing and deeply depressing…

At 4.20pm on Friday 7th December 2012 we were given the following quote for 500 litres of heating OIL from a very large and influential supplier that covers six counties:

75.2ppl

seventy five point two pence per litre – plus vat!

This price is over 25ppl above the wholesale price. This is simply wrong. Forget what I said on Day THREE about getting the OFT involved, we need a crisis summit with representatives of every aspect of the heating OIL industry as soon as possible – this week – before the prices are allowed to escalate any further…don’t you agree?

Keep warm!

Chris Pomfret

Dear David: day THREE of 20

Posted on December 7, 2012 by admin

Day THREE of TWENTY: when the price of crude OIL trundles down what happens to its by products?

Maybe I should put that another way: what should happen to its byproducts?

Over the last two weeks the price I am paying for my unleaded petrol has come down. It has been an extremely welcome relief as it was 136.9ppl and last weekend I filled up at 130.9ppl. Difficult to believe that 130.9ppl feels like relief. Why has it fallen? The price of crude OIL has fallen over that period and for once the pump prices have followed fairly quickly. In the last four days Brent crude OIL has dropped even more – in fact everyday from Monday to Thursday – and yesterday it fell by 1.7% to $107.03. Perhaps we will see more falls at the pumps – we can but dream. However, even though the wholesale price of kerosene has fallen by over 1.6ppl, over the same four day period, it seems we cannot expect falls in the price of our heating OIL. Quite the opposite they trundled up every day.

Why is this? Refined from the same product and sent out across the UK on the same delivery network, often by the same companies using the same tankers, it surely makes sense that the price of heating OIL should be falling. It is not! According to the Office of Fair Trading’s market study into Off Grid energy published in October 2011: “of the variation in prices over time [of heating OIL], over 90 per cent is explained by movements in the price of crude oil”. So this is clearly a period in that 10% when price fluctuations aren’t explained by movements in the price of crude OIL. So what can they be explained by?

I urge you to involve the Office of Fair Trading right now. We need to know the explanation for the deviation from the wholesale. We need to know why, when the geographical variation is rarely more than a couple of pence per litre, one independent supplier in Cornwall could be offering a price of 56.99ppl when a supplier of the same size in Oxfordshire is selling the same product at 66.99ppl? That is a £100 difference on an average delivery.  Get the OFT to come and work with us on a price harvesting initiative across the UK which would at best prevent the market from pushing prices even higher, at a time when so many vulnerable people are feeling the painful effects of the Chancellor’s austerity measures, or at the very least identify those suppliers that once again will stir the debate about excessive profit taking from customers that have no choice but to pay what is being asked of them. Of course I could go to the OFT, but they have never listened to me before so I doubt they will start now and besides this is such a huge issue that it should be solved by pressure from the very top…don’t you agree?

Keep warm!

Chris Pomfret

Dear David: day TWO of 20

Posted on December 6, 2012

Day TWO of TWENTY: how does this make any sense…?

As I said on day ONE: it seems there may be something wrong with the price of heating OIL again.

The wholesale price clearly determines what the end user pays for their heating OIL. The suppliers that deliver the OIL to homes have to buy it from somewhere themselves and whether that be refinery, terminal or a depot in between, the wholesale price is critical. Platts is the world benchmark for OIL commodities and we draw on market intelligence directly from this source. There are so many things that don’t really make sense when it comes to the business of heating OIL in the UK – transparent it is not – but one thing we can surely not question is that this wholesale price represents a true picture of the base price.

On the 23rd November our market intelligence informed us that the wholesale price for Kerosene (heating OIL) was 51.02ppl. Just two days ago on the 4th December this benchmark price had dropped to 50.4ppl. Down by over half a penny a litre. Our price harvest (see below for an explanation) for one specific county on the 23rd November reflected a market average of 62.32ppl, however, on the 4th December the market average was 67ppl. How is it possible for the wholesale price to drop whilst the market average of prices to the end user have risen by over 4.5ppl over the same period of time? How does that make sense?  Just in case it isn’t clear, four and a half pennies on every litre for a delivery of a thousand litres is an extra forty-five pounds that a customer is paying!

If we unpick some of the detail of the averages we see that some of the independent suppliers in the county – the ones that run from only one depot and have much less buying power because they buy much smaller amounts of OIL than their larger competitors – are still supplying their OIL at prices as low as 62ppl. But two brands of the very largest OIL supplier in the UK – the one that has more buying power than any other and is so powerful it can probably dictate much more than any of us can begin to fathom – are supplying their OIL at 68 and over 70ppl. Again I ask how does that make any sense? What are we left to think when the evidence is so damning and the industry is so reluctant to explain exactly why these circumstances occur.

These are deeply concerning issues within an environment where even more people are in fuel poverty than was the case last time and where these huge hikes seem to have begun much earlier in the month. David what are we going to do if we are – as it seems – heading back to the situation of two winters ago when prices went beyond 70% over wholesale?

I will, as promised, keep you updated every day.

[Price harvest – this is where we call every supplier that delivers to a county and ask for a secret shopper price. It is the only way to get a true price and therefore a true picture of the prices across the market, thus giving us a snapshot from which we can determine market averages. This is critical information that means we draw price information that is as accurate as possible from an industry that does little to ease their customers’ confusion over pricing]

Keep warm!

Chris Pomfret