Tony Tresigne is a professional money manager of sixteen years' experience and a former Conservative councillor in the London Borough of Richmond.
The price of a litre of petrol has hit an all-time high of £1.20. This price level has had some serious political connotations and the press are speculating about how this will impact on voters.
So who is to blame? Labour’s Lindsay Hoyle claims that motorists “are being legally mugged at the forecourt by petrol companies”. Others blame speculators, rising tax or the impact of reduced refinery and storage capacity on margins. While there may be some truth in all of the above, the move in the price of petrol is really another Brown stealth tax primarily caused by the fall in the value of the Pound.
Below is a long term chart of the price of oil adjusted from Dollars to Pounds.
It clearly demonstrates that although the oil price has almost halved from its $145 peak in Dollar terms, the move in Sterling has been far more muted. The impact of the exchange rate is almost always ignored in articles about petrol. For many years, this was fairly understandable as it made little difference. This is no longer the case. Journalists have not, in the main, recognised that the Pound currently trades with a volatility as high as most emerging market currencies. Drawing inferences from the unadjusted dollar oil price for UK petrol prices with this backdrop becomes fairly meaningless.