New deal for fuel retailers
Ryan TaylorA decision by Scottish Fuels to allow Western Isles garages to buy petrol and diesel from other suppliers is being extended to retailers here.
The Shetland Times has learned some retailers have already been freed from their obligations to the large oil company. But there are doubts as to whether the decision will pave the way for more competition in the isles.
Scottish Fuels announced on Tuesday it was giving petrol stations in Lewis the chance to walk away from their contracts and look elsewhere for their fuel.
The cave-in came after some filling stations there threatened to break their deals following boycotts by disgruntled motorists fed up with high prices.
A statement from the supplier said it had written to Hebridean retailers offering the opportunity to end their retail supply contract and move to “spot” buying on the open market.
The company confirmed it planned to make the same offer to “four retailers with contracts in the Shetland Islands.” But it insisted pump prices on the forecourts were “solely the responsibility of [the] retailer”.
“Contracts with retailers are very common throughout Britain and Europe, and are used by all fuel suppliers,” the statement said. “However, due to adverse publicity these contracts have attracted in the Western Isles, Scottish Fuels felt it appropriate to give the retailers … the option to re-assess their requirements”.
The company insists the move is not a reaction to any possible further investigation by the Office of Fair Trading (OFT), which has been probing pump prices.
“Scottish Fuels welcomes any future investigation as the company has acted in a fair and reasonable manner over the years, as confirmed by the last two OFT reports.”
Retailers here poured cold water on the announcement, and pointed to the sole storage depot for fuel here being owned by Scottish Fuels. That, they warned, could cause difficulty for any potential new supplier looking to match the fuel giant’s costs.
Owner of Tagon Stores in Voe, Scott Preston, said Shetland Islands Council needed to pay more attention to continuing high prices at the pumps. Earlier this year Mr Preston, and his wife Phoebe, slashed their prices by 20p a litre for one day to draw attention to the debate.
Mr Preston said: “I would be interested to hear what our council are saying. Are they supportive of trying to find cheaper solutions? What are they doing?
“The biggest issue for me is this: how could a family of four travel to Lerwick twice a week to buy their weekly groceries at Tesco’s and come back again and support their local businesses? How are people supposed to do that when fuel is so expensive?
“Whether we like it or not, the council have to be a part of that. They have to find a way to engage with the business. I really hope that this does make a huge difference, but I won’t hold my breath.”
He added the focus should now turn to dissuading the Treasury from its plans to introduce a three pence a litre rise in duty from January.
However, chairman of the council’s transport body Zet-Trans, Allan Wishart, warned the nature of the local fuel market left insufficient demand for a second fuel depot.
“People who have spoken about this have said the council should provide storage, but the council is not a fuel retailer or distributor,” Mr Wishart said.
“It’s up to the retailers and wholesalers to discuss their contract terms, and obviously that could be seen as beneficial so long as retailers and wholesalers are content with the outcome of that. “Retailers will be very careful, given there is only one depot. But if it can lead to cheaper fuel, I think everybody would applaud that.”
Isles MSP Tavish Scott said some local businesses had already been freed from their contractual obligations. He was more optimistic that other fuel suppliers could be attracted to the isles.
Mr Scott said: “I would welcome any step that reduces the cost of fuel in the isles. If the ending of this is that local garages can buy cheaper fuel and pass on the savings to Shetlanders that has got to be a step forward.”
However, head of the local branch of the Federation of Small Businesses, Ian Brown, said questions still needed to be asked over the continuing gap between Shetland and mainland prices, despite the introduction of the 5p derogation scheme by the coalition government.
“The price difference between the mainland and Shetland seems to be still 15p, 20p, or 25p. The 5p reduction was meant to bring us closer to the mainland price,” Mr Brown said.
“Somebody is pocketing the 5p and I’d like to know who. We’re being told it’s because of the extra cost of shipping to Shetland. But it can’t cost that much to ship fuel to Shetland.”
The news comes as the OFT prepares to publish findings from its recent investigation into pump prices in January. One element of its investigation surrounds what it calls “rocket and feather” pricing, when the pump prices “rocket” up as the price of oil increases, but drops like a “feather” when it comes down again.
Colin Hunter
There is no doubt that it is the fault of the UK Government in Westminster that the basic price is so high. After all, almost 60% of the pump price is made up of tax, and there is already a groundswell of opposition in the commons to next years proposed 3p rise.
Mr Chambers has already gone on record to say that it costs 2.7 pence a litre to shipfuel from Grangemouth to Lerwick. It would be interesting to compare the pump price at the nearest fuel station to the refinery in Grangemouth, to that at Grantfield, where the price certainly does not reflect the shortest supply distance in the isles. Mr Chambers will point out that they also have other costs and overheads to cover, and that retailers also take some profit. Fair comment, but then these costs, overheads and retail mark-ups also exist on the mainland.
I am in Yorkshire at present, and filled the car yesterday. The price of diesel was £1.41, in a station as far from the nearest refinery or supply depot as any in Sheetland are from Lerwick. That makes a difference of 13p, taking the derogation into account. It would be interesting to know where the extra 10p or so goes.
It is good of Mr Chambers to “release” retailers from their obligations, knowing full well that it’s ”Hobsons choice” anyway.
ian tinkler
“There is no doubt that it is the fault of the UK Government in Westminster that the basic price is so high”. Sure, Colin, that must be it, vote Salmond and get it all for free. Time to sing a new song Colin, maybe, that argument is just a little stale. Wicked, wicked Westminster!!!!!!!!!!
Stewart Mack
Yes it is Wicked Wicked Westminster – It is not Holyrood that has no idea of the geography of Scotland, nor is it Holyrood that thinks the highlands of Scotland can give up their cars and turn to Public Transport as a “viable” means of Transportation, But it is Westminster where residents dont have to travel by car (in fact its quicker not to on most occassions) it is Westminster that tops up the retail price of Petrol from the “on the pump” price of 57p per litre charged by the retailers with duty and VAT to what we pay today at Leasks and it is Westminster that sits making decrees to the far flung “nations” that make up the British Isles and where Scotland is all but a token voice, not even anymore a thorn in their side. And thats before we get into some of the shameful dealings which have gone on in the past from Westminster – from the Poll Tax to the breaking of the Busta House agreement, the “history” is lengthy but only one outcome, Scotland gets the smelly end of the stick all too often – or have you found a new and interesting way to blame all on Salmond and the SNP now too? The SNP are no saints, you only need look at the votes from the Edinburgh and Glasgow Bar associations to see that, but then neither is Westminster- Perhaops rose tinted spectacles work best from 600 miles away
ian tinkler
Well said Stewart you are quite ok about the geography. Edinburgh is over 300 miles from Lerwick and a lot harder to reach than Westminster from Edinburgh… Good reason for Shetland to go for Crown Dependency. Shetlander’s need an independent Scotland as much as a goldfish needs a motor bike. Just compare team UK with team Scotland. Third in the world (Team UK Olympics) and when did team Scotland ever last qualify (football), not even ranked in Europe let alone on a world stage, sorry, “Better together”?