By Robert Halfon - 13th September 2012
Tory MP Robert Halfon claims petrol prices are "crushing Britain" and creating a poverty trap, as he demands an investigation of the "oil cartels" not just from the Office of Fair Trading - but from the Financial Services Authority as well.
Today in Parliament, MPs of all parties will respond to an explosive whistle-blower statement that has been handed to PetrolPromise.com, a website that I set up to campaign for cheaper petrol and diesel.
1) Petrol and diesel have never been more expensive, in real terms.
2) Oil companies are uncompetitive, and are NOT passing on cheaper fuel to motorists.
3) There is increasing evidence that dodgy speculators are rigging the market, and forcing up the international price of oil.
First, the cost of fuel. To the Chancellor’s credit he has frozen fuel duty - not just for six months, or for 12 months, but for two whole years. Despite this, fuel prices are still rising and DECC said this summer that - in real terms - fuel has never been so expensive. To be clear - I believe we need to cut taxes on fuel. But the oil market makes up nearly half of the pump price. It must bear its share of responsibility as well.
If you don’t believe me, listen to what Sir Terry Leahy of Tesco said, in 2011, about the catastrophic slump in retail sales that has hit Britain. He said:
I don't think people fully appreciated what an oil shock we've had. Filling up the family car has gone up 70% in two years, causing what was a steady recovery to go sideways.
Yes the Eurozone crisis is difficult, and so is the overhang of debt - but it is expensive energy prices that are really hurting people on low incomes, and crushing our economic recovery.
Second, the oil companies. DECC data - from their Quarterly Energy Prices release - makes it clear there is now a three week delay between a fall in oil prices, and a drop in petrol prices at the pump. But even accounting for this delay, cheaper oil was not passed on to UK motorists for most of the last two years. This is true of nine out of the last 18 months. No market is perfect. But why are motorists always the ones to lose out?
Third, there is the allegation of price-fixing. This means that - even if oil companies were doing the right thing - that hedge-funds and speculators are rigging the price of oil, to keep it artificially high.
Many academics and financial journalists have said this is happening. For example, Rowena Mason has written an important piece in the Telegraph, about how oil price “benchmarks” are unregulated, and - like LIBOR - are vulnerable to manipulation. The Consumer Federation of America has raised the same concerns, as has Deutsche Bank, professors at MIT, Maryland University, and the LSE. Bloomberg and the Sun have written about how banks are buying up strategic stocks of oil, and hoarding them on ships at sea, or in underground silos. Finally, a whistle-blower who trades the oil futures market has contacted PetrolPromise.com, and given us a detailed statement about how the market is rigged.
"I trade the oil market on a daily basis, and every day the price is manipulated - not just the daily benchmark price but the calendar spreads that make up a large part of the daily volume. All through July, for example, there has been a massive buying-pressure on oil futures for August and September 2012. This gives a false impression of the market, and inflates the price of the nearby oil price, making prices higher on retail markets so pushing up the price of petrol at the pumps.”
He goes on to say:
One part of the problem is a lack of market transparency. In the oil futures market, huge volumes are offered and then withdrawn without trading. There is no reason for this behaviour other than to distort market prices - and unlike stocks and shares where large holdings have to be declared, in the oil market nobody knows where the money is coming from. Prices are particularly manipulated at the close of business, when "markers" are set on an average of trades in the last three minutes of the trading session. Every day, around these times, I see that the structure of the market is being moved to bring prices in line with the trading books of whoever is manipulating the market. This is in order to fix the price and make sure a profit is shown on their books.”
This is why today in Parliament, I will ask for an investigation not just by the Office of Fair Trading, but by the Financial Services Authority as well.Some of this debate is technical - but we should not forget that petrol prices are not just about money. They are an issue of social justice. Petrol prices are crushing Britain, and they are creating a poverty trap. There is evidence from the LSE that they are adding to Britain’s dole-queues. The AA says that low income families now spend more on filling up the family car, than on food. The ONS say that fuel prices are regressive - that they hit the poorest Brits the hardest. RAC figures show that an ordinary worker in Harlow is paying a TENTH of their income just filling up the family car - in essence that they are facing petrol poverty. In my constituency of Harlow, the question is not can you afford to drive; but can you afford NOT to.
Germany and Austria are cracking down on the oil cartels, America is taking action against rogue traders and banks - why can’t we do this here in Britain, too?
Robert Halfon is MP for Harlow. He tweets at @halfon4harlowMP