OPEC Opens Floodgates

Rumour of energy jump and crude oil prices raise (crude oil surged above $30 on New York’s Mercantile Exchange) pressure refiners to lift the cost of petrol and The strongest pressure is on the diesel market because of a shortage of “middle distillate” products in Europe.

Temporary refinery shutdowns have contributed to the problem, as has a scramble for jet fuel which some think may be due to heavy buying by airlines anticipating a war-driven price surge this year.

BP’s price move last week was only partially implemented, with the increase confined to low-cost sites in big urban areas where BP was selling petrol at 71.9p per litre. At that level, the company is earning an operating margin of just 2p per litre. BP can raise its prices up on 2 pence to cover its costs.

A factor in the decision will be the behaviour of supermarket discounters, who could use the opportunity to mount a price war to gain market share.

More important will be the outcome of Opec’s conference in Osaka next month, where three member states — Algeria, Nigeria and Venezuela — are lobbying to increase quotas. They are suffering cashflow crises over production quota cuts, but with Opec crude selling at well within its target $22-$28 range, there is little prospect that the cartel will open the floodgates.

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&to=http://www.opec.org' target=_blank>OPEC

&to=http://www.bp.com' target=_blank>BP