Oil Supply 'Crisis'

For the millions of UK homeowners who use oil as their primary heat source, the frequent price fluctuations are a fact of life. The price increase during November and December 2010 is unprecedented however, with the surge from 40p/L to over 70p/L exceeding the situation during the previous global energy spike.

Now Parliament is getting interested. Chris Huhne, Energy Secretary, said that rationing talks with the oil supply industry were proceeding. Labour MP Tom Watson described the situation as a crisis, as supply was definitely becoming a real problem for people in rural areas.

There was mention of some suppliers insisting on delivery sizes of 1000L or more, just at a time when they should be encouraged to restrict amounts to 200 or 300L to ensure that there's enough to go round. Oil suppliers are suspected of exploiting the bad weather (and high demand) by fixing prices artificially high. The Office of Fair Trading (OFT) has been notified to investigate whether profiteering has been going on.

Here is the relevant extract from the Commons Debate at parliament.uk:

Domestic Fuel Prices

18. Dr Thrse Coffey (Suffolk Coastal) (Con): What recent discussions he has had with energy companies on domestic oil pricing. [30983]

I declare an interest, as my home is heated by domestic oil.

The Minister of State, Department of Energy and Climate Change (Charles Hendry): I declare an interest, as mine is as well. We are in regular contact with energy companies, including the trade associations that represent those who supply domestic oil. Heating oil is a seasonal product, and its prices vary over the course of the year. I have spoken to the Office of Fair Trading about the price of heating oil, as the enforcement of competition and consumer law is a matter for the OFT, and it assures me that it is keeping a very close eye on the situation and is keen to receive evidence from hon. Members about any market abuse that they experience.

Dr Coffey: I thank my hon. Friend for that answer. Several constituents have contacted me about the price of oil. Mr Gander, in particular, relies on oil for his heating, but his supply is running low. A month ago the price was 39p a litre; it is now 71p a litre, and as a consequence he has switched off his heating system. Will my hon. Friend take up that issue throughout the Government to ensure that people are not frozen out of their homes this winter?

Charles Hendry: My hon. Friend raises an extremely important issue, which is about both pricing and the time that it takes to secure deliveries. People calling today who reckon they will be short of oil over the coming weeks are being told that they will not receive a delivery for three or four weeks. We are monitoring that situation day by day and are extremely aware that, if there is further snow ahead of Christmas, it could become very serious, indeed. I ask my hon. Friend to provide evidence on those price increases to the OFT, so that it can investigate them.

For us in North Norfolk, the situation looks typical: 70p/L for a non-urgent delivery of 500L, or 99p/L (!) for a delivery within 5 working days. These prices are astronomical, and bear no resemblance to the price of crude. I suspect that oil suppliers are simply unable to make as many deliveries because of the difficult weather conditions, and are ensuring a constant daily profit figure by charging high for the people they can actually deliver to.

[Note: By non-urgent, we are talking the first or second week of January 2011.]


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