Fleet operatives in the UK are being advised by both Petrolprices.com and the AA to prepare for continued fuel cost increases in 2017.
At the time of writing, UK motorists are paying an average of 117p per litre of diesel, with forecasts that the figure could rise to between 120 and 130p by the end of January. This prediction is based partially on the announcement by OPEC (the Organization of the Petroleum Exporting Countries) of their intention to reverse a global downturn in oil prices by cutting rates of production.
Formed of thirteen nations in the Middle East, South America and Africa, OPEC aims to reduce production by 1.2 million barrels daily. Increasing scarcity in the supply will drive price per barrel upwards, having a knock-on effect on prices at the pump.
The RAC is reporting that prices may rise into next year, as happened in 2008, the last time oil production was cut. Luke Bosdet, AA's fuel spokesman, has warned of biofuel shortages being an additional factor in the rise of diesel prices. He warns there has been a 'rubbish harvestî of oil seed this year, which constitutes 4.75% of diesel fuel. Biofuel scarcity could increase prices by a further 1-2p per litre.
Uncertainty surrounding Prime Minister Theresa May's handling of 'Brexit' is cited as another potential factor. Jason Lloyd, managing director of Petrolprices.com, said it is possible prices could fall if markets can be convinced that a 'soft Brexit' is forthcoming. However, weakness in the pound follows recent political developments casting doubt on the likelihood of a UK-EU agreement on single market involvement following Article 50's triggering due in March.
In addition, the recent election and imminent inauguration of America's impending President Donald Trump is another area prompting reservations. While some fear the outspoken President turning his hand to international relations may affect prices once sworn into office, Trump has also stated his intention to boost American oil production. Perhaps this is why RAC fuel spokesman Simon Williams declined to predict an exact figure, warning instead that fleets 'should expect uncertainty' this year.
Eduarda Amaro, principal consultant at Lex Autolease, advises fleet managers to run operations as efficiently as possible based on wholelife costing models, as fuel price fluctuations contribute to 25% of costs. The use of fuel cards to gather data on driver efficiency and behaviour may be another route for businesses to take in order to reduce the impact of the increases. Mrs Amaro also predicts that fuel duty will remain frozen into 2018 as a result of price rises. She said: 'With prices rising at the pumps, hitting drivers with the double whammy of that and an increase in duty would be too much.' Global oil prices and wholesale costs are affected by many factors. As a result, current short-term forecasts are subject to change.