Fuel has become the latest source of frenzy in UK markets. Drivers flocked to petrol stations over the weekend, with long queues forming through the nation’s cities, despite government efforts to convince the public that there is no shortage of fuel.
What’s going on, and will things get back to normal any time soon?
What happened?
Members of the Petrol Retailers Association, which represent roughly 65% of UK forecourts, say that panic buying left the taps dry at up to 90% of the UK’s 8,000 petrol stations on Sunday.
Cars queued at forecourts, prompting many petrol stations to shut down, unable to meet demand. BP said that the panic buying saw it run out of its two major grades of fuel on Sunday, forcing it and other forecourts to ration some supplies.
The panic buying and shortages come at an unsettled time. Last week also saw a massive surge in both UK natural gas and electricity prices hitting headlines, as well as a shortage of fertilisers and CO2, which is used in the manufacture of many products.
What is causing the fuel shortage?
The havoc in fuel markets stems from the shortage of lorry drivers. Last week, BP, along with some Esso-owned Tesco Alliance stations, said that it had to close petrol stations temporarily, because it did not have enough lorry drivers. This in turn prompted many drivers to scramble to petrol stations to fill their tanks, ignoring government advice.
How serious is the shortage and how long is it expected to last?
As a result of the chaos, almost 400 petrol stations, including those owned by Shell, Esso and BP, have introduced a £30 fuel limit to give customers a fair chance to fill up.
But is the UK’s fuel situation really as bad as people say? Ministers have been quick to deny claims that the UK is facing a national fuel shortage, with the transport secretary, Grant Shapps, calling the turmoil a “manufactured crisis”.
Unsurprisingly, several fuel providers, including Esso and ExxonMobil, released a statement with industry bodies stating there was no overall shortage of gas.
The UK’s business secretary, Kwasi Kwarteng, said: “We have long-standing contingency plans in place to work with industry so that fuel supplies can be maintained and deliveries can still be made in the event of a serious disruption.”
Boris Johnson’s spokesman echoed the view. “We have ample fuel stocks in this country – the public should continue to be reassured there are no shortages.”
What measures has the government taken to defuse the situation?
As a shortage of lorry drivers sparked the fuel crisis, so the government has taken measures over the weekend to attempt to fix it.
It announced a temporary three-month scheme, expected to last until Christmas Day, to make it easier for 5,000 foreign lorry drivers to work in the UK. Up to 4,000 people will also be trained as new HGV drivers to tackle skills shortages.
It has also temporarily suspended competition laws to enable oil companies to supply petrol stations more efficiently. Officials said the relaxed competition measures will allow the industry to share information more easily so that deliveries can be prioritised in regions which are experiencing more acute shortages than other parts of the country.
On Monday, environment minister George Eustice denied earlier media reports that the army may be deployed to help with fuel deliveries.
"We've no plans at the moment to bring in the army to actually do driving,” Eustice said. "But we always have a civil contingencies section within the Army on standby – but we're not jumping to that necessarily at the moment." However, this morning, the government said that army tanker drivers have indeed been put on standby.
Is this the first time the government has relaxed competition rules?
No, this is not the first time the government has done that. It also relaxed competition laws in March 2020, at the depths of the coronavirus crisis. That paved the way for retailers to share data on stock levels as well as share delivery vans and distribution depots, to ensure minimum disruption to vital supply chains during panic-buying last year when the pandemic kicked off.
What are the knock-on effects?
Edmund King, the president of motoring association the AA, said that there is “plenty of fuel at source”, and the situation will rectify itself in just a matter of days.
If that is true, given the government has already introduced measures to tackle the HGV driver shortage – the root cause of the fuel crisis – it is likely that higher fuel prices will only be temporary. But, that being said, consumers may still suffer short-term disruption and higher prices while the driver shortage persists.
From an investment angle, there are unlikely to be any ramifications due to the short-term nature of the fuel situation, but it is worth keeping an eye out on oil and gas companies.
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