IT'S a small world, they say, and these days you can be sure that if one key country suffers a nosebleed, we are all going to have to mop up the mess.
It is a fact being borne out at the moment, with motorists all around the world feeling the stra
in of rising petrol prices, which are mostly down to a few key factors that are pushing up the price of oil – and thus having an impact on every country in the world reliant on vehicles.
This week's record profit figures from oil giants Royal Dutch Shell and BP led to widespread dismay about how the big companies can be making more money than ever before yet not passing any of those profits on to the consumer.
And while in the UK we pay higher taxes on fuel than anywhere else, we are far from alone at expressing dismay at the amount we are having to pay for our fuel.
It was a realisation borne out by a colleague on a recent road trip around the United States. His journey from coast to coast set him back half the cost he expected because the price of petrol was about half what we pay here as a result of lower taxes.
Yet, despite the comparative cost of fuel, he found every local newspaper in every town and city he went through filled with the same fury we see here over rising costs at the petrol pump. There were even huge protests as people took to the streets to demand that something be done.
Despite tax on petrol being nowhere near what we pay here, and prices being a drop in the ocean compared to the UK, they are not happy.
Yet the reasons for the rising cost of petrol in the US are the same as the reasons here: the price of oil has reached record levels. This time last year, a barrel of Brent crude oil was costing somewhere in the region of $61. Earlier this week, it hit an all-time high of $119.
So why is it happening? Oil is a very volatile commodity and its price can be influenced by any number of factors.
There is more demand for oil than ever before, largely driven by the Middle East and Asia. The credit crunch might have been expected to reduce demand, as more motorists look to cut their spending on fuel, but in reality it has made the price higher. Since the Federal Reserve cut US interest rates and central banks pumped billions of dollars into financial markets to ease the crisis, prices for oil and gold have risen.
The value of the dollar has also been tumbling in recent months, cutting the purchasing power of the revenues generated by the Organisation of Petroleum Exporting Countries (Opec), and making prices rise. It is also said that the lack of new refining capacity in major consuming nations is also having an impact on price.
Furthermore, there is no question that decades of wars, sanctions and underinvestment has hit Iraq, a key nation in the global oil game.
YET despite all of these factors, since Wednesday, when BP said it generated £3.32 billion of profits in the first quarter and Royal Dutch Shell said it had raked in £3.92bn, the finger of the consumer has been assertively pointed at the oil companies.
There is a belief the kind of growth that these firms are seeing should help ease the amount that the individual motorist is needing to pay at the pump.
But the Petrol Retailers Association says most forecourt retailers are, in fact, selling fuel at a loss. The only way they can break even or make any money is by fully utilising the additional retail space that is usually found at the forecourts, it says.
Ray Holloway, the PRA's director, said: "Most of the sites in the UK branded BP or Shell are actually independent retailers. They work in a challenging business area, with high costs and very low returns. Most are kept afloat by the shop attached to their site.
"For many, these numbers are unsustainable and they are being forced to close in increasing numbers.
"Around 300 filling stations shut down every year, and motorists are now noticing gaps in fuel availability, and if it gets worse as expected, they will certainly be inconvenienced when searching for a forecourt in some areas."
There are around 9200 forecourts in the UK, including supermarket filling stations, which amounts to the lowest number of filling stations since 1912. Since the fuel protests in 2000, one third of the filling stations open at the time have disappeared.
So it is clear that selling fuel is not big business. It would, therefore, be unfair to blame only the oil companies. Stephen Brooks, an analyst at Edinburgh-based energy consultant Wood Mackenzie, said: "It is not BP or Shell that sets the international commodity prices for crude oil or the refined products manufactured from it," he said. "It is the market itself that determines the price level.
"For these companies as businesses, their main business is getting a valuable commodity out of the ground so when the market value is high, as it is today, they benefit. But they also have to invest to fund more exploration."
Mr Brooks does not see any real reason to expect the upward pressure on the price of oil to ease, although he admits that if the world was to encounter a global recession then that could have an impact.
"The market is sensitive and the least bit of adverse news can push up the price of oil. So it can be very difficult to call what is going to happen next.
"But if the global economy moved into a significant recession over a long period then you cannot avoid the laws of economics. You would expect to see a downturn in oil price."
All of which means the high price of oil, and the resultant cost of petrol, are here to stay, unless we move into a recession. And if that was to happen, anything that is saved on petrol would more likely than not be lost elsewhere.
Oil is a global commodity, which is in increasingly short supply. What is happening elsewhere in the world is likely to continue to cause an upward pressure on price.
And until we significantly cut our consumption, that is unlikely to change.
The full article contains 1113 words and appears in Edinburgh Evening News newspaper.
