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Robert Halfon MP: Three ways in which we're being ripped off by oil companies

Halfon Robert 2013Robert Halfon is the Member of Parliament for Harlow. Follow Robert on Twitter.

To misquote Benjamin Franklin, there are only two things certain in life - death and fuel taxes. Every budget, Governments used to raise fuel duty at midnight and motorists would flock to petrol stations the night before. This Government is the first to reverse this trend for many years. Not only has it frozen fuel duty in real terms, but also cut it by 1p in 2011. Yet despite this, the price of petrol and diesel has become the number one toxic political issue. And why? Because motorists are facing fuel poverty. Figures show average motorists spend £1700 per year on fuel - a tenth of their income.

Of course the Government can do more to cut fuel duty, and I hope it is the first candidate for tax cuts as soon as the economic conditions allow. But we have to face the inconvenient truth that it might also be oil companies keeping up the price of fuel, even taking into consideration geo-political factors. So how are they allegedly doing it?

  • Petrol Deserts.  Britain now has 60% fewer petrol stations than it did in 1990. This has left some areas of the UK as “petrol deserts” where motorists have to drive miles to fill up. There is a wealth of evidence. In Cornwall, for example, a hypermarket sold fuel below cost-price until all the other independent petrol stations closed. Then the prices rose considerably. Without market choice, there is no competition - and this keeps our fuel prices high.
  • Rocket and Feather Practices.   Ever noticed how prices at the pump are quick to go up, but slow to decrease? In December last year, the AA showed that from October 2012, the wholesale price of oil had fallen by at least 10p, but only 4p of this saving had been passed on to motorists. Furthermore, data from DECC shows that there is a price lag of around 3 to 4 weeks before any savings are passed on. However, when the international oil price increases, evidence shows that the oil companies are quick to raise the price of petrol at the pumps - sometimes significantly higher than the market suggests; this was the case in February 2012
  • Financial speculation is keeping prices high.  As documented on the website that I set up, there are whistleblowers who allege that there is manipulation of prices in order to increased profits. One way this is alleged to have been happening is the abuse of the Platts system, which is the world’s leading oil price reporting agency. Every day, there is a half-hour period where oil transactions are self-reported to Platts. This leaves the system open to manipulation and lacking in transparency. A whistleblower told me about how huge trades would be offered and then withdrawn to manipulate the price of oil.
Other whistleblowers have told me about other scams, such as how companies would allegedly buy oil from other oil companies at key times to restrict supply.This is particularly an issue when oil companies would benefit through Contracts for Difference (CFD), which pay out depending on the relative price of oil over two different dates. Oil companies would buy an excess of oil from other companies, and subsequently sell it for a below-market price once the CFD has netted a massive profit due to the restricted supply . This results in a false impression of the market and artificially increases the price of oil, resulting in huge profits for the companies. Of course, the increased price of oil is then passed down onto the consumer.

As Conservatives, we shouldn’t be shy of attacking croney capitalism. This is not an assault on capitalism or the free market: it is precisely the opposite. Conservatives have a responsibility to ensure fair competition, transparency, and genuinely free markets. If it is true that oil prices have been manipulated, we should use the full force of the  criminal law to deal with it - even changing the law to ensure penal sentences for major price-fixing. There should also be no taxpayer subsidies to these industries, and if serious price fixing is proved to be widespread across the oil industry, rather than being limited to allegedly one or two companies, the Government should consider a windfall tax on the oil industry where the proceeds raised are passed back to the consumer through lower fuel duty. If true, their actions will have had an enormous impact on every individual whether they drive or not. The price of oil affects food, transport, industry, and can act as a major brake on economic growth. 


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