Why have Petrol Prices not fallen in line with the price of Crude?

A colleague asked me why petrol (gasoline) prices in the UK have not fallen in line with the Crude Oil Price.

From the peak price of $145, crude oil is now around $45 per barrel, a fall of nearly 70%.

The prices we pay per litre of petrol has fallen only 25%

 

I did a quick calculation to show him that we have benefitted in full.

Pump Prices for Petrol (Gasoline)
£ Per Litre (Incl VAT) £ Per Litre (Excl VAT)
July 1.18 1.00
Dec 0.87 0.76
% Fall 26% 24%
£ change -0.31 -0.24
Crude Oil Price
$ per barrel £ per barrel £ Per Litre
July 145.00 72.50 0.35
Dec 45.00 30.00 0.14
% Fall 69% 59% 59%
£ change -0.20

The price at the pumps includes VAT (Value Added Tax). Until 1st December it was 17.5%, then reduced to 15%.

Since July the British pound has fallen from £1=£2 to £1=$1.50, partly offsetting the fall in the crude price.

 

 That the oil companies have had a small reduction in their margins. Extrapolating, if the cude oil price went to zero, the pump price would still be around £0.70p per litre (around $4 per US gallon). Most of this is due to taxation. This has increased by over 50% since the mid-1990s, when pump prices (with 17.5% VAT) fell below £0.50 per litre.

 

The margins of the oil companies may have reduced slightly, but are largely irrelvent to the calculation.

 

 

 

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