Fuel distributor ‘profiteering’ with large price increases before introduction of duty discount
Fuel company GB Oils has been accused of profiteering by increasing prices for petrol and diesel in Shetland in the run-up to the introduction tomorrow of the islands duty rebate.
Prices at most forecourts went up by 3p last week and have risen again this week by 2p while mainland prices have increased on average by just over 2p. The duty discount, designed to cut prices by 5p a litre, has been more than five months in the planning by the Treasury.
GB Oils argued that the rises reflected the increase in the cost of a barrel of oil – Brent crude was $123 on the spot market today compared to $111 at the end of January.
But a Treasury source dismissed that claim, pointing out that the fuel in Shetland had already been paid for and delivered to the islands. The Sarnia Liberty made a delivery to Lerwick last Wednesday. “It does look pretty suspicious,” he said. “Given that [the scheme] has been planned for some time you wonder how they could be so stupid.”
Bigton-based consumer campaigner Paul Meyer said: “It sounds like profiteering to me. The problem is you can’t get to the bottom of it because GB Oils won’t open their books. They claim they are operating on tight margins but we’ll never know.
“The Office of Fair Trading is now going to look at island prices but that will take ages, maybe years. And anyway, it doesn’t have any teeth. In the meantime it just goes on and on.”
GB Oils director Sam Chambers, who is due to attend a public meeting in Shetland on 19th March, told Radio Scotland: “How can you profiteer if you are making 2.6p per litre? The margin we make is to cover our transport costs, we have drivers to pay. The public perception and reality are not exactly the same.
“We are quite prepared for our company’s figures to be scrutinised by anyone independently as to what we actually charge. We do not set the retail price on the islands – they are set by the retailers. We import it and we sell it, and we do it, we think, to the best of our ability.”
He added: “The main people who make money out of fuel are Her Majesty’s government. There is 20 per cent VAT and there’s 57.9p duty on it.”
Official figures published by the European Comission yesterday confirmed that British motorists pay the highest fuel taxes in Europe, with 60 per cent of the price of unleaded petrol and 58 per cent of diesel made up of fuel duty and VAT. This has risen by more than 20 per cent since 2001. If there was no fuel duty and VAT motorists would pay just 59.8 pence per litre for diesel and 52.8 pence per litre for petrol.
Isles MP Alistair Carmichael said: “Now public money is going into the provision of road fuels in Shetland, and with public money there must come accountability. Anybody who is seen to be abusing this system in any way needs to be made to account for that.”
MSP Tavish Scott said: “If Shetlanders don’t see a 5p fall in the difference between Aberdeen and Lerwick tomorrow then somebody is profiteering at local motorists’ expense.”
He welcomed the commitment by Mr Chambers to open his distribution company’s books so that islanders can see what his company makes.
He added: “Nothing is more important to the islands’ economy and everything we do than the price of fuel. The OFT are now looking at the wider costs we face as islanders but I have always wanted them to focus on fuel. An OFT investigation can go hand-in-hand with Scottish Fuels’ welcome commitment to open their books so that we can understand why we pay so much more than Aberdeen. But tomorrow when the 5p fuel duty cut comes in then the price difference between Shetland and Aberdeen should fall by 5p. Otherwise someone is at it.”
George Smith
Have GB Oils costs of delivering fuel to Shetland really increased by 5p a litre in the last 21 days ? What a strange coincidence!
Allen Fraser
The real villian is the government fuel tax and VAT that is strangling small business, so please support the Fair Fuel campaign challenge below:
URGENT CHALLENGE PLEASE. The media has asked us to find the most expensive filling station in the country. Can you send me the price per litre for diesel and petrol of your filling station plus location and postcode if possible with brand of fuel too. Send your response to [email protected]
http://www.facebook.com/FairFu…..8785580345
http://www.fairfueluk.com/
Dave Brown
The government should be reducing the tax on petrol and diesel and abolishing road tax for a start.
Colin Hunter
I listened to Mr Chambers on Radio Shetland tonight, apparently blaming the Government for the price of fuel. We all know that the tax that is levied on road fuel is little short of outrageous and we don’t need him to tell us that again. People on the mainland are also taxed to the same level, yet the 15 to 20 pence discrepancy exists. He also claimed they “only” made 2.6p a litre profit, as outlined in the article above. I daresay mainland distributors also make a similar amount.
The Border Heather, which is one of the tankers regularly delivering fuel to the islands, carries 3000 m3 or 3,000,000 litres. That works out to £78,000 per tanker load. He claims he must pay his drivers and run his delivery fleet, So do the mainland distributors. However, that still does not explain the discrepancy which exists between the price of fuel landed over the jetty at the North Ness and the price at the loading jetty in Grangemouth, which will be the same per litre as charged when filling a road tanker there. Due to economy of scale, it should cost MUCH less to transport fuel by sea, 3,000,000 litres (or more) at a time, than by road tanker. The ship has a crew of 9. Carrying that much fuel by road would take at least 100 tanker lorries and 100 drivers! I once worked out that the ships FUEL cost of getting a load from Grangemouth to Lerwick was in the region of 0.2 pence per litre. The lorry worked out to 0.8 pence plus wages and other costs to ABERDEEN! To be fair, because it is a day’s run, you must add on the other operating costs (Crew wages, victualling, insurance, maintainance, depreciation etc) to attain the true cost over the return journey. Tanker lorries also return to the depot empty. With the best will in the world I can’t see it would total more than 5 pence. I tried to find out the actual daily running costs of such a ship, but I was unable to do so, so the 5p is an educated guess, and probably rather more than the actual cost. So, we’re up to 7.6 pence.
Chris Williams wrote in a recent post, that home heating oil was 28 pence a litre cheaper in rural Derbyshire than in Shetland. It probably has to come from either Tranmere or Immingham by road, or rail, via a local distributor, quite a distance! Where has the extra 20p come from? bearing in mind that heating fuel does not attract road excise duty and with only 5% VAT it can’t be the government to blame for that!
Stewart Mack
Its good to see that GB Fuels are to “open their books”, but remember thier accounts are available from Companies House to anyone for the princely sum of £1 each – i doubt they will be releasing anymore than that!
But lets have a look at GB Oils, or should i say Anmer oils, or perhaps Bates and Hunt Petroleum or maybe EMO Fuels or Grampian Fuels…. There are as far as i can make out after 2 mins internet research, 31 names for GB Oils, which itself is a “DCC Company”. DCC Plc advertises on its website that :- ” DCC is the largest oil distributor in Britain, selling approximately 4.4 billion litres of product per annum on a proforma basis which gives DCC approximately 14% of the market.* DCC has been a consolidator of the highly fragmented oil distribution market in Britain having first entered the market in September 2001 with the acquisition of BP’s business in Scotland. DCC Energy is one of the largest oil distributors in Austria and Denmark with respective market shares of 12% and 13%. In Northern Ireland, DCC Energy is the largest oil distributor with a market share of approximately 20%, while in the Republic of Ireland DCC Energy has approximately 6% of the market”
So far we now know we have the LARGEST distributor in Britain supplying us – they also state :- “DCC Energy purchases its oil and LPG from the major oil companies with which it has established excellent long standing relations. DCC Energy’s supply strategy is to maintain a portfolio approach to the sourcing of its oil and LPG products. DCC’s significant financial strength provides DCC Energy with a significant competitive advantage in building long term partnerships with its suppliers.”
So they clearly have the bulk buying power AND the strategy to give us the cheapesty fuel prices so why dont we have just that????
So come on Mr Chambers, you are happy to open your books – well lets see them, and the costs of the 31 other brands that DCC operate under – then we will be able to tell if the Shetland supply has been artificially inflated at its buy in cost price, Perhaps Mr Chambers would be kind enough to prove me wrong and show that all 31 companies under the brand (let alone DCC) have the same cost for their raw product – i know what i think the outcome will be……………..
William Williamson
Like Mr Hunter above, I am very sceptical about the figures that Mr Chambers was quick to raise when defending their fuel prices. For example the “2.6p per litre profits” he mentioned, is this the national average or the amount they make from Shetland and /or the outer Isles only? If it is the average what is the differing profit margins between Shetland and mainland Scotland?
Yes, there is a lot of taxation placed on fuel as he also noted, but that does absolutely nothing to explain the notable difference in price between here and the mainland. That statement rubs off (on me at least) as an exercise in shifting the blame.
I for one would like to see an accurate breakdown of exactly where all the money spent on fuel goes to, ie I go to the pumps in Lerwick and buy one litre of petrol: How much of what I’ve spent is tax and duty, how much goes towards transport costs, how much of it goes to storage and so on and so forth accoutning for every penny I’ve spent on the petrol.
And I would also like to see a similar breakdown if I was to buy a litre from a pump in Inverness, Glasgow or similar in the mainland so we can compare and see where the “real” differences in fuel costs for GB Oils lie and more specific questions can be raised as to why they are so different.
Surely if GB Oils are so willing for us to scrutinise their accounting and coin counting, they shouldn’t have any problem in supplying us with these breakdowns.
Stuart Wilding
To be fair petrol here in Gloucestershire has risen 6p a litre in the last week. It’s probably just bad timing that it has arrived when the 5p duty rebate comes into force.
That said I agree with Colin Hunter that the cost of transporting fuel to Shetland seems to be far less than the distributors are making out.
thomaskeegan
product for Shetland would be loaded out of Finnart( not exactly round the world) there is very little competition in supply.GB oils own in the region of 32 former independents.Still trading under their original names and liveries it is not clear who the actual owners are.This situation has been achieved by aquisitions.There is probably only a handfull of genuine independents left.These companies are finding it difficult to survive the cometition and price cutting from GB.This state of manopoly should never have been allowed to grow to this stage.They (GB Oils) have no real overheads,such as exploration ,shipping or refining.They simply buy and sell petroleum which given your figures are right yields vast profits.
The future could see the whole oil distribution business reduced to a couple or even one major player.This may be in the inerest of the company and shareholders but not to the consumer.