Fuel Crisis

[River Don]

Albeit with deep economic problems and a strangled trading environment.

Minor problems in comparison. Even the ongoing lockdowns in China weren't having such a severe impact.

You only need to look at the European gas price charts to see when inflation took off.

[SydneyRover]

I'm not arguing that there is a fuel price crisis RD I'm saying the economy as a functioning entity was in a hole and noone at the wheel.

[BillyStubbsTears]

This crisis although very relevant to recent events has also been bubbling away for some time, that successive governments have made deliberate decisions to use ideology over proven economic pathways has left little room to move. The economy was driven down with Austerity and institutions defunded, de-staffed and a there is a large cohort of working poor. Brexit probably has been the tipping point where the economy has proven to be totally unprepared for the Ukraine shock and a government awol. The economic rebuild has to start, the govt has all the information and treasury to advise them they need to get on with it.

We seemed to be emerging from the pandemic pretty well last summer. Best growth in the G7 and all that. Forecasts were positive.

It was September last year when things went wrong. That was when the gas price exploded (immediately putting the UKs Fertilizer producers under severe pressure)

That was when Putin started turning the gas taps off to pressure Germany and the EU over Nordstream 2.

"Best growth in the G7" was typical 21st century Tory b*llocks.

We had the worst COVID economic downturn in the G7. Because we dealt with 2020 COVID worse than any other G7 country. So when we finally locked down, it was harder and longer than any other G7 country.  So we were always going to have the biggest rebound. If you push a spring harder, it will bounce back further when you let it go.

But that was for a brief moment in time.

The Tories focussed on relentlessly talking about the rebound then because it suited them then. But the long term performance of our economy is f**king dreadful. Because of Austerity.  Followed by Brexit. Followed by a Govt that hasn't got a f**king clue what needs to be done to get us moving.

[big fat yorkshire pudding]

As we've discussed before I'm not sure that has much of an effect on the drivers of inflation right now though.

[BillyStubbsTears]

It's the context of an economy that has gone off the rails since 2010.

From 1950 to 2010, we averaged 2.3% GDP growth per year. If Treasury projections are right, from 2010 to 2026, annual growth will have been about 1.5%.

Inflation will end because it's primarily driven by an exogenous supply price shock. That will not go on forever. But we have no plan whatsoever to correct our dreadful long term productivity and growth.

What the Tories do now is to accept the current built-in failure and call it success. It's a modern form of 1984 DoubleSpeak.

[Filo]

Fuel prices have gone up 37% in the last year, and customers moan because we have put our prices up by 15% and we’re nowhere near the levels of business pre covid

[River Don]

I wouldn't disagree that the long-term policy of austerity has subdued the UK economy for years BST.

But this current energy crisis is on another scale.

[River Don]

This inflation is likely to be extend because for one thing the Ukraine war looks set to drag on.

For another thing investment in hydrocarbons has been low because of concerns about the climate.

Suddenly we are trying to pull more of the stuff from the North sea and elsewhere but that won't be a fast process. Plus there is still reluctance to invest in a technology now that must be phased out soon.

Bringing in vast amounts of clean energy sources won't be fast either.

A lot of western Europe simply doesn't have the infrastructure to ship vast quantities of LNG from elsewhere. Time again.

The middle Eastern producers are enjoying high energy prices and don't seem to be of a mind to pump a whole lot more yet.

Whilst this inflation will subside, I don't see it being a rapid process, unless there is an unexpectedly fast resolution to the war.

[selby]

  RD, do you think one of those owners of a middle eastern oil company making mega bucks might like a real project to take over a small fourth tier football club in Doncaster and project them to the top table in European football, the Champions League?
  At least it would see some good come out of all this mess.
 

[River Don]

Somehow I doubt it Selby.

I think if I were an oil billionaire who fancied a go at English football, I'd pick Aston Villa.

Generally I think west midlands clubs have underachieved for decades.

[selby]

  Where is the fuel crisis? there is no shortage at the pumps, there is no shortage of gas, at least no different on our cooker, the electric light and TV still comes on, and the water still comes out of the taps.
  It's just dearer to buy, now before people start shouting I have every sympathy for the lower income families, and help should be at hand and rightly so, especially those who through no fault of their own struggle with life and finances.
  But for those on good incomes who have lived to the limit, and have had the luxuries in life that they really could not afford, and have not put a little aside for a rainy day I have no sympathy at all.

[River Don]

Well in Ireland they are already preparing for rationing and speed limit drops.

So even though it's only visible in rising prices now, there is a genuine squeeze on fuel supply.

[SydneyRover]

  Where is the fuel crisis? there is no shortage at the pumps, there is no shortage of gas, at least no different on our cooker, the electric light and TV still comes on, and the water still comes out of the taps.
  It's just dearer to buy, now before people start shouting I have every sympathy for the lower income families, and help should be at hand and rightly so, especially those who through no fault of their own struggle with life and finances.
  But for those on good incomes who have lived to the limit, and have had the luxuries in life that they really could not afford, and have not put a little aside for a rainy day I have no sympathy at all.

This makes a lot of sense, but not everyone understands how to live within their means and it will hurt, they may have to trade down to lifestyle they are not used to, but that's the thing they can, those on the bottom rung don't have that luxury and as you say they should be helped.

[River Don]

I think most people understand how to live within their means.

The problem is this inflation is forcing people to live within much reduced means. That is not easy.

It's particularly acute for those at the bottom but it's going to cause problems much higher up the ladder too.

[idler]

The problem is that some people who were comfortably living within their means are now under pressure from all sides at once. Food, fuel, energy and interest rates all rocketing up.
Those that do have savings will soon see them dwindle.

[BillyStubbsTears]

This inflation is likely to be extend because for one thing the Ukraine war looks set to drag on.

For another thing investment in hydrocarbons has been low because of concerns about the climate.

Suddenly we are trying to pull more of the stuff from the North sea and elsewhere but that won't be a fast process. Plus there is still reluctance to invest in a technology now that must be phased out soon.

Bringing in vast amounts of clean energy sources won't be fast either.

A lot of western Europe simply doesn't have the infrastructure to ship vast quantities of LNG from elsewhere. Time again.

The middle Eastern producers are enjoying high energy prices and don't seem to be of a mind to pump a whole lot more yet.

Whilst this inflation will subside, I don't see it being a rapid process, unless there is an unexpectedly fast resolution to the war.

What is the mechanism by which inflation continues to stay high? Remember that inflation is the annual percentage rise in prices. We have high inflation at the moment because of a combination of a sudden increase in fuel costs,plus a COVID-related reduction in Chinese output meaning that there are fewer goods coming to the global market and therefore more demand than supply.

The Chinese slowdown will not go on indefinitely, so there's a natural end to that driver of inflation. And even if the Ukraine war drags on, I don't see a mechanism whereby fuel prices continue to climb at the current rate over a period of years. Absolutely, fuel prices may stabilise at this high level, but then the annual inflation in fuel costs would be zero.

Inflation gets embedded if you get into a price rise->wage rise -> increase in production costs -> price rise vicious circle. But at the moment there is very little sign of that happening. Wages aren't going up at anything remotely like the rate of inflation, like they did in the 1960s-1980s, where high inflation got bedded in. For one thing, organised labour is nowhere near as strong as it was half a century ago, so the impetus to higher wages simply isn't there.

What the current crisis looks like resulting in is a shock that makes us all somewhat poorer than we thought we were. It's a one-time step change in the cost of living, not a remorseless year-on-year huge increase. That will be an inconvenience to the well off and a disaster for the very poorest. The correct way to address that is a policy of redistribution to stop the poorest dropping through the net altogether, while the wealthiest tighten their belts a bit more.

Of course, we'd be in a far better position to handle that is we hadn't just had a decade of awful economic underperformance and massively depressed growth in wages that has resulted in so many having little spare to fall back on, but that's where we are. Like some of us were predicting back in 2010. For the medium term, we absolutely must not double down on Austerity. We need economic growth that starts to rebuild people's wages and living standards and we need a serious approach to prioritising the move away from carbon-based fuel. The latter is exactly what we did in response to the oil price shocks of the 1970s, when the price of oil quadrupled in 1973, then doubled again in 1979. As an example, in the early 1970s, the average fuel usage of American cars was about 12 mpg. In 1975, a REPUBLICAN government passed legislation requiring the average to be 27.5mpg by 1985. And they hit that.

There's no question that the rest of the 2020s is going to be economically a bad place for us. It shouldn't be as bad as it is, but the f**k up that put us here was made a long time ago. You say that the inflation crisis is a far worse thing than Austerity. It isn't. It is a bad thing BECAUSE OF Austerity. Don't underestimate how vulnerable Austerity and the resulting underperformance has left us. We now produce annually about £200bn less than we would have done if we'd got back to the pre-2010 growth trend. Think about how much better we'd be able to ride out this problem if we hadn't gone down the Austerity hole as a political choice. If we had re-stimulated the economy and invested in non-carbon energy and energy saving, like serious insulation, we would be in a much healthier place. We simply MUST do that now.

[BillyStubbsTears]

This inflation is likely to be extend because for one thing the Ukraine war looks set to drag on.

For another thing investment in hydrocarbons has been low because of concerns about the climate.

Suddenly we are trying to pull more of the stuff from the North sea and elsewhere but that won't be a fast process. Plus there is still reluctance to invest in a technology now that must be phased out soon.

Bringing in vast amounts of clean energy sources won't be fast either.

A lot of western Europe simply doesn't have the infrastructure to ship vast quantities of LNG from elsewhere. Time again.

The middle Eastern producers are enjoying high energy prices and don't seem to be of a mind to pump a whole lot more yet.

Whilst this inflation will subside, I don't see it being a rapid process, unless there is an unexpectedly fast resolution to the war.

What is the mechanism by which inflation continues to stay high? Remember that inflation is the annual percentage rise in prices. We have high inflation at the moment because of a combination of a sudden increase in fuel costs,plus a COVID-related reduction in Chinese output meaning that there are fewer goods coming to the global market and therefore more demand than supply.

The Chinese slowdown will not go on indefinitely, so there's a natural end to that driver of inflation. And even if the Ukraine war drags on, I don't see a mechanism whereby fuel prices continue to climb at the current rate over a period of years. Absolutely, fuel prices may stabilise at this high level, but then the annual inflation in fuel costs would be zero.

Inflation gets embedded if you get into a price rise->wage rise -> increase in production costs -> price rise vicious circle. But at the moment there is very little sign of that happening. Wages aren't going up at anything remotely like the rate of inflation, like they did in the 1960s-1980s, where high inflation got bedded in. For one thing, organised labour is nowhere near as strong as it was half a century ago, so the impetus to higher wages simply isn't there.

What the current crisis looks like resulting in is a shock that makes us all somewhat poorer than we thought we were. It's a one-time step change in the cost of living, not a remorseless year-on-year huge increase. That will be an inconvenience to the well off and a disaster for the very poorest. The correct way to address that is a policy of redistribution to stop the poorest dropping through the net altogether, while the wealthiest tighten their belts a bit more.

Of course, we'd be in a far better position to handle that is we hadn't just had a decade of awful economic underperformance and massively depressed growth in wages that has resulted in so many having little spare to fall back on, but that's where we are. Like some of us were predicting back in 2010. For the medium term, we absolutely must not double down on Austerity. We need economic growth that starts to rebuild people's wages and living standards and we need a serious approach to prioritising the move away from carbon-based fuel. The latter is exactly what we did in response to the oil price shocks of the 1970s, when the price of oil quadrupled in 1973, then doubled again in 1979. As an example, in the early 1970s, the average fuel usage of American cars was about 12 mpg. In 1975, a REPUBLICAN government passed legislation requiring the average to be 27.5mpg by 1985. And they hit that.

There's no question that the rest of the 2020s is going to be economically a bad place for us. It shouldn't be as bad as it is, but the f**k up that put us here was made a long time ago. You say that the inflation crisis is a far worse thing than Austerity. It isn't. It is a bad thing BECAUSE OF Austerity. Don't underestimate how vulnerable Austerity and the resulting underperformance has left us. We now produce annually about £200bn less than we would have done if we'd got back to the pre-2010 growth trend. Think about how much better we'd be able to ride out this problem if we hadn't gone down the Austerity hole as a political choice. If we had re-stimulated the economy and invested in non-carbon energy and energy saving, like serious insulation, we would be in a much healthier place. We simply MUST do that now.

Looks like that well known socialist propaganda rag The Economist agrees with much of this..
https://www.economist.com/leaders/2022/06/09/low-economic-growth-is-a-slow-burning-crisis-for-britain

The only point of contention is that they reckon we are £450bn/year worse off after the recent years of pitiful economic performance, not £200bn as I said.

And as I've said elsewhere, they point out that this most mendacious of Govts keeps insisting, by plucking out of context figures, that the economy is just fine and dandy.

[albie]

No fuel crisis for the landed gentry in merry old England;
https://www.opendemocracy.net/en/renewable-heat-incentive-mps-peers-landowners-anne-marie-trevelyan/

At least when you are freezing your nads off next winter, it will be a comfort to know that you are paying for the quality to live in a snug baronial pile.

That's where we are going wrong....born in the wrong place, then voting for people who reckon this sort of scam is reasonable behaviour.

[BobG]

And Geoffrey Clifton-Brown is my sodding MP!

Still he has put my email in front of the Home Secretary's team...  So that's alright then. Not.

BobG

[Nudga]

Neil Ferguson has confidently predicted that 1 liter of fuel will cost £1,500 in two weeks.

[BillyStubbsTears]

Yawn.

[Nudga]

Yawn.

Hyaah, like totally mendacious dude.

[albie]

Fuel prices have gone up 37% in the last year, and customers moan because we have put our prices up by 15% and we’re nowhere near the levels of business pre covid

Winners and losers in the fuel price escalator;
https://inews.co.uk/news/full-tank-petrol-costs-electric-vehicle-charge-1680823
Those prices are based upon buying in the electric.....obviously making your own with solar on the roof is a different game.

It will generate changes in the wider economy which are based on assumptions of transport costs which no longer hold good.

Looks like the end of just in time delivery schedules, and a return to warehouse inventory to me.

[ravenrover]

Diesel £1.94 from £1.89 overnight at my local petrol station but strangely no new delivery so old fuel in their tank has gone uo by 3p who is profiteering there!! I will be visiting the local supermarket for my next fill

[drfchound]

Raven, Tesco at Edenthorpe dropped their diesel price by 1p per litre today.
Now at 1.879 per litre.

[wilts rover]

Oil refineries are making 5 times as much profit as they did a year ago. It's not the cost of extracting oil thats putting the prices up - its just pure greed by the oil companies:

On the 8 June 2021, refiners were making $9.26 per barrel from refining petrol, and $6.84 per barrel refining diesel.

On Wednesday (8th June 2022), they were making $43.11 on petrol, up 366%, and $51.13 on diesel, up 648%.

Figures published by BP, which owns a number of refineries in Europe and the US, shows its own measure of refining profits, the ‘Refining Marker Margin’, up from $7.7 dollars per barrel to $35.7 over the past year.

https://www.bbc.co.uk/news/business-61750251

[Filo]

Raven, Tesco at Edenthorpe dropped their diesel price by 1pm per litre today.
Now at 1.879 per litre.

It was 187.9 yesterday morning when I filled up there

[Janso]

Been priced at that for a few days now, I drive past it on my commute.

[drfchound]

When I filled up last Wednesday it was a penny more.

[ravenrover]

Raven, Tesco at Edenthorpe dropped their diesel price by 1p per litre today.
Now at 1.879 per litre.

Great, but not good for me living down here just outside Snottingham :-))