Motorists braced for further petrol price hikes
Motorists should brace themselves for more petrol price hikes in light of record oil prices and the threat of strike action. Oil prices hit $117 a barrel on Monday 21 April as traders reacted to fears of a planned two-day strike in Grangemouth oil refinery in Scotland. The strike, which is pencilled in for this weekend, would cause major fuel supply issues and could also prompt panic buying.
Petrol prices have been creeping upwards over the past 12 months in response to rising oil prices. According to the AA, a litre of petrol currently costs 108.7p a litre, up from 93.5p a year ago. Diesel has increased from 95.48p this time last year to 118.9p today.
The AA estimates a family with two cars now has to pay £32.97 more per month for petrol.
Edmund King, president of the AA, says: "UK motorists are spending more than £10.2 million extra on fuel each day compared to last year. This is beginning to hit the economy with car dependent motorists cutting back on other expenditure.”
Business secretary John Hutton has reassured motorists that the government will do all it can to resolve the dispute at Grangemouth and prevent strike action. The refinery produces 200,000 barrels of petrol a day.
Why is petrol getting more expensive?
Direct supply problems are the latest in a string of incidents pushing up the cost of petrol. As well as the proposed strike action in Scotland, a fire in a Finnish refinery in April has also caused serious supply issues that have helped 'fuel' rising costs.
Political events across the world are also having an impact on the cost of filling up your car. For example, Shell has cut back on some production in Nigeria after its pipelines were sabotaged in the southern part of the country. The firm has reported losses of 169,000 barrels a day as a result of the attacks.
Largely, it is the perception of shortages of oil that have pushed up prices. Several countries have voiced concern that oil output is not high enough to satisfy demand. But Opec – the organisation that represents oil producing countries – has rejected calls for it to increase its output of oil and insists there is more than enough oil in the market.
What should you do?
The AA has called on motorists to remain calm even if the strike in Scotland does go ahead. It says that there will be plenty of petrol for everyone as long as people only fill up when they need to.
When it comes to saving money on anything, the thing to remember is to always shop around. Type ‘cheaper petrol’ into google and you will find a host of websites that offer to find the cheapest petrol stations in your local area. If you do buy petrol from a station, then make the most of the pennies you spend. You could consider using a cashback credit card which pays up to 5% back each time you use the card. But make sure you pay the card off in full each month or you will end up having to pay interest.
If you buy your petrol from Asda then you could also consider taking out an Asda credit card. This will save you 2p per litre every time you fill up at one of the supermarket’s petrol pumps. Currently, the typical APR is 17.8% but it does offer 0% of balance transfers for nine months (with a 2.5% fee) and 0% on purchases for three months.
Or, if you buy your petrol from Shell at least once every six months then a Shell credit card offers 3% rebate on future Shell purchases or a 1% rebate on fuel purchases elsewhere. The typical APR is 16.9% but the card is interest free for the first nine months on balance transfers (subject to a 3% fee).
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
This is used to compare interest rates for borrowing. It is the total (or “gross”) interest you’ll pay over the life of a loan, including charges and fees. For credit cards where interest is charged at more frequent intervals, the APR includes a “compounding” effect (paying interest on interest). So for a credit card charging 2% interest a month (equating to 24% a year), the APR would actually be 26.82%.