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  • Impact of No Deal Brexit on UK Fuel Supplies

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    With 3 months to go, and all political sides split over how to implement Brexit (or not), one question we are being asked by some of our customers is what impact a No Deal Brexit event would have on the supply of Diesel, Gas Oil and Kerosene.

    Having read lots of industry insider briefings, Government updates and looked at our own supply chain, I think there are 3 potential risks that anyone using oil for heating, power generation, transport or another commercial use should consider as we approach the deadline for leaving the EU.

     

    1. The most obvious factor is the exchange rate between Sterling and the US Dollar, as all global fuel is dollar priced. If the pound weakens, the real price of fuel rises, and vice versa.

    Over the past 6 months, the pound has been trading between $1.43 and $1.21, which is around 18% shift, that said at the same time, the underlying price of the fuel has also been moving due to global demand and OPEC’s attempt to manage the price (and Trump’s attempt to stop them). In the same time period, the oil price has also moved from $86 down to $58 which is a 45% swing – Often the two factors cancel each other out, although the overall trend has been down as the oil price falls have outweighed Sterling’s fall. This volatility would more than likely increase if the markets sense that we are heading for a No Deal event. I seems likely that Sterling will lose value in the short term, which pushes prices up. It is, of course, perfectly possible that global trends and a falling oil price would negate this impact, although it could amplify it.

     

    1. Import restrictions on Crude Oil and Refined Petroleum

    Around 40% of the oil we use in the UK is imported, some of it in Crude Oil form, some in refined product such as Diesel. In a No Deal scenario, technically the various agreements that allow us to trade oil out of the main oil hub of Rotterdam would be invalid, and hence supplies could be impacted in the days after Brexit. In reality, there are many other routes for import, but in a worst case, this could become a factor and drive prices up. The actual impact, in my judgement, would be far less than the fear of the impact, as per the final item below.

     

    1. Fear of shortage, driving shortages….

    As ever, we humans have a habit of reacting to the fear of an event, rather than the event itself. I think the most likely risk to supply and price increases would be the fear that supplies might be hit. Whilst I think this is an unlikely outcome, I think the media focus on what Brexit could mean in a worst case could have the effect of making people take reasonable precautions and filling fuel tanks in cars, lorries, homes and businesses – If this happens within a short time period, the stocks of fuels will quickly run low, and the fear of running our becomes self fulfilling. I think this is a real risk, and who could blame the public for wanting to make sure their cars are full of fuel, their businesses have plenty of stock and their homes heating tanks are full during a period when it can often be very cold in March.

     

    I worry that due to the levels of disagreement within the political classes, we will see more and more scare stories within the main stream media, and this will cause the greatest problems (and not just for fuel..)

     

    So what is my advice? – well it would seem prudent to make sure that domestic and business fuel tanks are kept topped up – I would certainly not be running dry and desperate for fuel in February or March, or you risk being part of the problem of a rush on supplies. My advice would be that with oil prices low, and Sterling still relatively stable, it might well be worth filling up any tanks you have over the next few weeks, there is no need to panic, just make sure that you use the time available to avoid any rush as the deadline approached – and then take some smaller deliveries in Feb and March to keep topped up. It might cost a bit more for a smaller delivery, but the risks of not getting fuel, or paying a huge premium would be mitigated.

     

    I would also point to the Cold Weather Priority scheme (CWP) https://www.coldweatherpriority.co.uk which is promoted by the Federation of Petroleum Suppliers and operated by a number of its members, including us. The CWP allows vulnerable domestic customers to notify their supplier that they would be at risk if fuel supplies run low, and hence are given priority in such an event. In a worst case scenario, that would mean that if we do get problems with fuel supply, anyone on the scheme will be prioritised for deliveries. If you are not on the scheme, just call your FPS supplier and make sure you are registered, it is very simple and free to join!

    Disclaimer – The views in the email are mine, based upon all the information available. I make no predictions as to the outcome of the Brexit process – I will leave that to our elected politicians to sort out…or not.

     

    Happy Christmas,

    Chris Bingham - CEO

    18th December 2018

     

     

     

  • When did you last check the health of your fuel tank?

    Making sure your Heating Oil tank has enough fuel in is very important… but did you now that maintaining your tank to keep it safe and fit for purpose is just as important?

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    OFTEC advise that you regularly check the condition of your tank as this can help identify any risk of tank failure and also reduce the chances of a fuel spill.

    If your tank displays any of the following issues you could be at higher risk of tank failure:

    • Single skinned tank – these are at a greatly higher chance of leaking as there is no protective bund around the tank.
    • Rust and corrosion (metal tanks) – this puts your tank under immense pressure when you take a load of fuel, increasing the chances of your tank cracking.
    • Sun Bleaching (plastic tanks) – this makes the plastic tank more brittle and at a greater risk of failing when you receive a fuel delivery.
    • Inappropriate location – if your tank is installed in an unsuitable location the tank may undergo more stress so the condition of it will decrease at a faster rate.
    • Unstable base – an unstable base can cause your tank to lose its shape, making the condition of the tank worse and in turn increasing the risk of your tank splitting.
    • Damaged site gauges / fittings – damage to gauges and fitting greatly increases the chances of a fuel leak.
    • Persistent smell of fuel – this is often the case when there has been a fuel spill nearby. Although the fuel may not be visible, there is a chance it has soaked in to the ground, causing great environmental damage. If the fuel has spilt into your property the damage to your home could be beyond repair if left too long, meaning a part of your home could need rebuilding.
    • Visible cracks (regardless of size) – A crack in a fuel tank will most likely lead to a spill especially if your tank is metal and/or single skinned.

    As well as checking your own tank regularly we advise that you get an annual OFTEC certified technician to perform a Tank Inspection. We can offer UK wide OFTEC Certified Tank Inspections so if you have any concerns about your tank, or it has been over a year since you last had a Tank Inspection please give us a call on 01422 882500.

  • How could the UK election result effect your fuel price?

     

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    Chris writes:

    Now that the dust is settling after the results of the General Election last week, we can start to see what impact it might have on the prices we will be paying for fuel in the UK in the coming months.

     

    The main direct impact of the election result in relation to U.K. Fuel prices will be on the value of sterling, which has dropped around 2% since the results were declared, but probably less than many, including me, might have thought, bearing in mind how much uncertainty came with the results.

     

     

    I would suggest that the pound will be volatile in the coming months, so prices of kerosene and gas oil might jump around a bit, but diesel prices will be far less proportionally affected due to the fixed amount of tax it attracts. In general terms, around 80p per litre of what we pay at the pumps is tax, and around 35 - 40 p is the actual cost of the fuel (which is the bit that changes with oil prices and currency).

     

    As ever, things outside of the UK are more likely to have a bigger impact.

     

    For example, the week prior to the election saw a major fall in global oil prices triggered by Shell reopening a Nigerian oil field (adding 240,000 barrels per day of supply) and the US Department of Energy reporting higher than expected stocks of fuel...This saw a 5% oil price fall in two days.

     

    Most of the longer term forecasts suggest that the price will continue to hold around $50, as it has for the majority of the past year.

     

    That said, we live in a time where forecasts are often inaccurate....as Mrs May found on Friday morning…

  • What impact has the triggering of Article 50 had on Heating Oil prices?

     

    ….Well, from early indications very little!

     Indeed, whilst Brexit fills the UK news channels, the global oil market is far more focused on two competing factors – will OPEC extend the cut in oil production when they meet next in May, and if they do, will the US Shale Oil teams keep pumping more oil to compensate (which is largely what has happened over the last few months). The markets seem to be working on the basis that any cuts from one side, will just be matched by increased from the other, so we might expect a stable 6 months of dollar based oil prices, between $50 and $55 – Still a long way below July 2008 when the price arched $134, but well above the $31 in January 2016.

     Of course the other major factor on heating oil prices here in the UK is the Sterling : Dollar rate. Here, Brexit has clearly had an impact, as the generally weaker pound might have been helpful to exporters, but it has pushed up the relative price we pay for oil.

     To give you an idea, in the 12 months from February 16, the oil price in dollars rose 67%, but in the UK, with the impact of Sterling, the rise was 91% - so a significant factor. That said, the pound has strengthened in recent months, and the oil price has fallen in March, so the forces that have driven the price up over the past 12 months, have started to work more in our favour.

     

    Pound sterling

    The question is, for how long?

     My best guess, and I’m an oil distributor, not a trader….is that the underlying oil price will remain stable, the various forces at work look to be balancing themselves out, so my bet is small daily movements up and down, but generally flat. The impact of Sterling is much more tricky to call. Much depends on the early exchanges in the Brexit negotiations – Will the EU push politics over economics and drive a harder deal, which might lower Sterling, or will both parties come up with a deal that keeps much of the status quo, in which case the markets would feel more comfortable and Sterling would rise again.

     I’m no better informed than the next person in regards to this, my instincts are that both sides will find an accommodation for each other’s needs, but I am a businessman, not a politician and they may decide to play a different game.

     So, in summary, Article 50 / Brexit has almost no direct impact on the oil price, but due to the move in the Pound,  it already has impacted what we pay in the UK and will remain the most likely factor to change price moving forward.

     One last thing to consider is that the diesel and petrol you put into cars, busses and lorries carries both duty and VAT on Duty (70p per litre). This does mean that even a large move in the fuel element has a much smaller impact on the price we pay at the pumps – which I suppose is good news, of some sort….

     Chis Bingham

    CEO Craggs Energy

    March 2017

     

  • Sam Clegg – Employee of the Quarter April – June 2016

    Distribution Manager Sam is the most recent winner of our Craggs Energy Employee of the Quarter Award!

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The Industry

2017 Show Dates!!

 

 

Halifax Agricultural Show – Saturday 12th August

Pendleside Tractor Rally - Saturday 19th August

Kilnsey Show – Tuesday 29th August

Westmorland County Show – Thursday 14th September

Penistone Show – Saturday 9th September

Make sure you call over to our stand where we will have complimentary drinks, competitions for all the family and a special show-only price! Alongside this, members of our team will be on hand to discuss your Heating Oil, Red Diesel or Lubricant requirements.