Why are we writing about fuel prices on the QVM traders blog?
Discretionary consumer spending is at risk from a lot of factors and the amount
our customers have to spend on energy has significant impact. The less our
customers have to spend on fuel, the more they can spend with us.
And the fall in petrol prices is significant. Prices of $1.50 per
litre were common 6 months ago and today we are down to $1.10 per litre which
probably translates to a saving of $10-$20 per week for many motorists. And
maybe that makes a trip into QVM a little more palatable for shoppers.
So, why are petrol prices falling and, more importantly, how long
will this last. Essentially, the industry is experiencing over supply. A lot of
smaller producers have come into the market over recent years and they are
contributing to excess oil so the price is dropping as producers scramble to
maintain their share and their production levels. Shale oil producers in the US
are a good example of new production. The cynics would suggest that the big oil
producers are deliberately reducing prices to squeeze out the new smaller
operators who have significantly higher production costs, but we don't claim to
be experts on these matters.
Suffice to say, the fall in petrol prices is welcome for many
reasons and it would appear that it will be maintained for some time, perhaps even a
couple of years. But we are just a humble trader's blog so no promises.