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Roddy Graham's Blog: 2 May 2008

Date: 02 May 2008

Roddy Graham is chairman of the ICFM and commercial director of Leasedrive Velo

Well, how times have changed. I clearly remember the price of petrol at the pumps used to be around 30 pence per gallon in the early 70s. Now, it's touching £5 per gallon.

Last of the sub-$100 oil barrel

Well, how times have changed. I clearly remember the price of petrol at the pumps used to be around 30 pence per gallon in the early 70s. Now, it's touching £5 per gallon.

More recently, the $100 price per barrel of oil was deemed the high point of crude. Besides that ceiling being broken regularly in recent months, we have the prospect of a barrel commanding $200 by the end of the year according to Opec.

Throw in the fact the major oil companies are making profits of £3 million an hour and you've got the sure-fire recipe for rising discontent. Two hundred odd truckers protesting down Park Lane surely is only the start. High oil prices don't just affect HGV operators but anyone reliant on any form of motorised transport, not forgetting domestic and commercial users of heating oil. The first quarter of the year has been a body blow to moral, the pocket and the bottom line.

It's easy to blame the oil companies but they are scrambling around in more inhospitable places on Earth trying to discover that elusive new giant oil field. Just as oil reserves gradually diminish, we have the new giant economies of India and China demanding more oil. Not exactly a supply and demand equation that balances!

Add to the problem, the speculators switching from dollar-valued assets to oil to make another quick buck, and the price of oil rises further. Some estimate they have contributed to nearly a third of the increase. In the middle of all of this, we have Saudi Arabia refusing to increase production.

Accounting for over 10% of world oil production, the Kingdom is in the unique position of being able to influence prices. Not only has it declined to help meet demand but also has actually reduced production twice in the last year and a half when oil barrel prices weakened. With the demand from the two fastest growing economies skyrocketing, there has been no chance of lower prices.

In all of this the Government is not doing badly as its VAT receipts rise in line with rising fuel prices but how long before it has to do something to mitigate the effects on industry and the consumer?

Back in the 70s, Government interventions led to widespread fuel economy measures including the temporary lowering of the national speed limit. As I've alluded to in my blogs before, a 50mph blanket speed limit may well become reality in time.

Meanwhile, we all have to tighten our money belts, take a deep breath and hope for better times around the corner. The trouble is we have probably seen the last of sub $100 oil barrel prices and could have to live with prices double that figure as the norm.



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