Comment: Fleets and oil volatility during Covid-19
Paul Holland, MD for UK Fuel at Fleetcor, looks at the current uncertainty of oil and fuel prices.
The coronavirus pandemic has forced many companies to slow or halt operations altogether, meaning much of the UK’s workforce – more than 31 million of us – have been forced to work remotely or stop working altogether.
Since the nationwide lockdown began on 23 March, we have seen an immediate effect on the nation’s demand for fuel, which has decreased, but at the same time due to socio-economic factors at source, prices at the pump are dropping.
But there are wider implications at play, which are having an effect on the price of fuel and, ultimately, for your business.
Fuel in the eye of the perfect storm
The price of fuel is impacted by market expectations either rising or falling in line with the socio-economic landscape globally. So, with many major economies locking down the movement of people, this has significantly reduced the anticipated demand for oil, something that is a major player in determining the price of most products or commodities. It comes as no surprise then that this has been a significant factor in causing the price of oil to fall dramatically, with petrol prices reaching a three and a half year low in April.
It’s not just the demand that impacts the cost of fuel at the pump, as the price is also driven by supply and how much fuel may be available. The US, Saudi Arabia and Russia are all major oil producers for the global supply chain, but a recent dispute between Saudi Arabia and Russia is driving both countries to compete and produce excess oil in a bid to maintain their revenues. This unexpected over-supply is adding further significant downward pressure on prices. And, although there has now been an agreement put in place to control supply, the scale of Covid-19 and its impact on demand has continued to ensure a low oil price.
Local impact on forecourts
At fuel stations in the UK, we’re already seeing the possibility that some forecourt owners might not be able to survive the pandemic as sales of fuel dry up and their businesses ultimately become unviable. However, those that have convenience stores onsite and are able to remain open will be able to compete by selling goods and essential supplies to those unable or unwilling to face queues at larger stores or supermarkets. As a result of this downturn in consumer demand, we are seeing a lot of forecourts holding on to their fuel prices rather than moving them with the market in the same way they normally would.
That said, UK petrol prices fell by their largest margin in 12 years during March. The price of oil was $50 a barrel at the start of the month, before dropping by 66% to $22.74 at the end of March before dropping even further in April – its lowest level in 18 years. Therefore, it is key for business owners and fleet operators to monitor the pricing at your nearest stations; tools such as our online UK Fuel Price tool can help you find the most up to date information.
How businesses can keep moving and stay informed
We are all facing uncertain and unpredictable times, with many companies being forced to tighten their belts in some areas of business. They can however take advantage of lower fuel prices at the pump to help improve cash flow. I can also reassure them that despite many imports being affected as a result of the lockdown, there is no shortage in the supply of petrol or diesel across the UK.
Unfortunately, clarity and future predictions for fuel prices is almost impossible, and the short-term outlook is likely to change by the day. As such, my advice for business owners and fleet operators is to keep an eye on reputable media sources and industry experts for updates on the latest news, as well as monitoring our UK Fuel Price tool for the latest information on fuel price shift.