22 December 2016
Fleets to face fuel price rises after OPEC deal cuts oil production
Fleet managers must face up to fuel price increases, at least in the short term, after oil producers agreed to cut production for the first time since 2008.
The OPEC cartel of oil producers agreed to cut production in an attempt to address the global supply glut and lift prices. The oil producers have agreed to cut production from January for at least six months.
Announcement of the deal immediately sent oil prices surging by as much as 10%, which will inevitably feed into rises at the pumps over the coming weeks.
Also influencing pump prices through the remainder of 2016 and into 2017 will be the value of sterling, as oil is traded in dollars. As a result, weaknesses in the value of sterling will be reflected in petrol and diesel price increases.
The OPEC deal reflected a change in policy by the oil producers, which have had a long-running strategy of oil oversupply to maintain market share.
RAC fuel spokesman Simon Williams said: ‘The oil price will react in the coming days and weeks, likely pushing pump prices up in the short term. But it is what happens into 2017 that will determine if the days of relatively low priced fuel are coming to an end.’
However, he added: ‘There is another important consideration when it comes to the price of oil - OPEC represents many of the biggest oil producing nations, but not all. So what the United States does in terms of production can affect oil prices. It remains to be seen if the United States will respond by increasing yet more oil from fracking - which was not profitable when the oil price was lower.
‘Drivers should also remember that while the oil price is the biggest variable impacting UK pump prices, it’s not the only variable. The sterling/dollar exchange rate is also crucial - as oil is traded in dollars, a weaker pound, like we’ve seen since the European Union vote, can have the effect of pushing prices in the UK up. A stronger pound can have the reverse effect.’