Rising crude prices may reduce consumer confidence in Britain
Saturday, 11 April 2009
Dongying Wang and Rob Welham
Recent optimism seen on Wall Street has boosted crude oil prices but the increase in turn may force up filling station prices and reduce consumer confidence.
Britain is particularly vulnerable to increased oil prices. The country is heavily reliant on imported food and consumer goods, soa rise in fuel prices could add to the burden of shoppers within the country.
A little over a year ago, oil soared above 100 U.S. dollars per barrel. This forced prices up around the world. In Britain, the price of fuel increased dramatically, with some outlets charging as much as 1.5 pounds (2.23 U.S. dollars) a liter.
Though showing steep net rise in 2008, fuel prices fell sharply in Britain from last August onward, but not at the same rate as crude. And the price may be forced up again after a shift in crude oil prices.
Early this month, the price of oil rose sharply after rises in the U.S. stock markets fuelled cautious optimism about the global economic outlook.
On April 9, the price of U.S. light crude rose by 5.5 percent to 52.12 dollars a barrel. London Brent oil also climbed some 2.50dollars to 54.09 dollars a barrel. But many analysts feel such rises will be short-lived.
As a result, fuel prices have already been creeping up in Britain, a country which sees some of the highest forecourt prices in the world.
This week, unleaded fuel costs an average of 94.1 pence (1.40 U.S. dollars) per liter in Britain, as compared to the average of 0.53 dollars in the United States.
With fuel prices remaining high across Britain, consumers are cutting back on unnecessary journeys.
Jeffrey Webster, a utility worker in east London, told Xinhua that prices had increased at his regular filling station.
"Over the last week unleaded petrol has gone up from about 91.9pence a liter to 93.9 pence," he said, "The price rises make you conserve fuel for essentials like going to the shops and work. It all makes life more awkward."
Although Webster's car is relatively economical, he said he was thinking about getting his motorcycle back on the road.
"I can't see the light at the end of the tunnel," he said.
Self-employed workers are particularly hard hit by high fuel prices.
"I already have to turn down work as fuel costs make it uneconomical," Mick Fallon, a laborer, told Xinhua.
Often having to cover many miles as part of his job, he said it is difficult to persuade employers to pay extra costs.
Britain has become increasingly reliant on imported products and a hike in fuel prices may push up the cost of goods in the shops as both production and transport costs will be passed onto consumers.
The cost of living is already rising and British shoppers are finding it more difficult to make ends meet. Although there are many special offers in supermarkets, food prices in Britain remain high.
A check of an average shopping basket will find everyday fruit and vegetables from all corners of the world. Chillies may be imported from Kenya, spring onions, courgettes and aubergines from Spain, and even mushrooms might be imported from Ireland.
Some everyday products may come from as far away as New Zealand, which is a major supplier to Britain of butter and lamb. While many of these products remain affordable at present, increased fuel prices will make them too costly for many shoppers.
According to the National Statistics Office, the consumer prices index annual inflation rose to 3.2 percent in February from3.0 percent in January.
The NSO figures showed that the price of food and non-alcoholic beverages rose the most and the largest individual factor was the price of vegetables.
Consumer confidence has slipped substantially this year despite efforts by the British government to kick start the economy. Cuts in interest rates, a reduction in VAT (Value Added Tax) and quantitative easing have all so far failed to get the economy moving.
The British Nationwide Building Society said the consumer confidence index fell to 41 in March from 43 a month ago.
In a recent press release, the British financial institution said that two thirds of those it surveyed were pessimistic about the unemployment situation in Britain.
Nationwide's chief economist, Fionnuala Earley, remained broadly upbeat. "Overall consumer confidence has remained broadly stable since the start of the year," she said.
But she conceded that many will feel insecure about their jobs.
"Feelings about the current labor market have weakened and further reports of job losses are likely to have affected consumers' views of this," Earley said.
The rise in the price of crude may not be sustainable however. Early trading on Easter Monday in Asia saw a fall in the price perbarrel. Oil prices fell to below 52 dollars a barrel after the International Energy Agency said it expected global crude demand to drop this year.
OPEC, the Organization of Petroleum Exporting Countries, has cut oil production since September, and does not expect the price to exceed 75 dollars a barrel in the coming year.
"OPEC believes the current price is not sustainable for exploration," one media business analyst, who asked not to be named, told Xinhua. "They want a price of 60 to 70 dollars."
Iran, one of the world's major oil producers, has indicated that crude prices may reach 60 dollars per barrel by the third quarter of 2009. But the OPEC member has said that the price needs to level at 80 dollars in order to secure future supply.
Gholamhossein Nozari, Iran's oil minister, said Sunday that "with 75 to 80 dollars per barrel... producers can secure the future of energy supply in the world."
Though OPEC is considering making cuts in supply, non-OPEC countries may upset the status quo.
"It seems that whenever OPEC members cut output, non-OPEC members increase it. These two (groups) should cooperate with each other to stabilize the market," Nozari said.
— Xinhua
Recent optimism seen on Wall Street has boosted crude oil prices but the increase in turn may force up filling station prices and reduce consumer confidence.
Britain is particularly vulnerable to increased oil prices. The country is heavily reliant on imported food and consumer goods, soa rise in fuel prices could add to the burden of shoppers within the country.
A little over a year ago, oil soared above 100 U.S. dollars per barrel. This forced prices up around the world. In Britain, the price of fuel increased dramatically, with some outlets charging as much as 1.5 pounds (2.23 U.S. dollars) a liter.
Though showing steep net rise in 2008, fuel prices fell sharply in Britain from last August onward, but not at the same rate as crude. And the price may be forced up again after a shift in crude oil prices.
Early this month, the price of oil rose sharply after rises in the U.S. stock markets fuelled cautious optimism about the global economic outlook.
On April 9, the price of U.S. light crude rose by 5.5 percent to 52.12 dollars a barrel. London Brent oil also climbed some 2.50dollars to 54.09 dollars a barrel. But many analysts feel such rises will be short-lived.
As a result, fuel prices have already been creeping up in Britain, a country which sees some of the highest forecourt prices in the world.
This week, unleaded fuel costs an average of 94.1 pence (1.40 U.S. dollars) per liter in Britain, as compared to the average of 0.53 dollars in the United States.
With fuel prices remaining high across Britain, consumers are cutting back on unnecessary journeys.
Jeffrey Webster, a utility worker in east London, told Xinhua that prices had increased at his regular filling station.
"Over the last week unleaded petrol has gone up from about 91.9pence a liter to 93.9 pence," he said, "The price rises make you conserve fuel for essentials like going to the shops and work. It all makes life more awkward."
Although Webster's car is relatively economical, he said he was thinking about getting his motorcycle back on the road.
"I can't see the light at the end of the tunnel," he said.
Self-employed workers are particularly hard hit by high fuel prices.
"I already have to turn down work as fuel costs make it uneconomical," Mick Fallon, a laborer, told Xinhua.
Often having to cover many miles as part of his job, he said it is difficult to persuade employers to pay extra costs.
Britain has become increasingly reliant on imported products and a hike in fuel prices may push up the cost of goods in the shops as both production and transport costs will be passed onto consumers.
The cost of living is already rising and British shoppers are finding it more difficult to make ends meet. Although there are many special offers in supermarkets, food prices in Britain remain high.
A check of an average shopping basket will find everyday fruit and vegetables from all corners of the world. Chillies may be imported from Kenya, spring onions, courgettes and aubergines from Spain, and even mushrooms might be imported from Ireland.
Some everyday products may come from as far away as New Zealand, which is a major supplier to Britain of butter and lamb. While many of these products remain affordable at present, increased fuel prices will make them too costly for many shoppers.
According to the National Statistics Office, the consumer prices index annual inflation rose to 3.2 percent in February from3.0 percent in January.
The NSO figures showed that the price of food and non-alcoholic beverages rose the most and the largest individual factor was the price of vegetables.
Consumer confidence has slipped substantially this year despite efforts by the British government to kick start the economy. Cuts in interest rates, a reduction in VAT (Value Added Tax) and quantitative easing have all so far failed to get the economy moving.
The British Nationwide Building Society said the consumer confidence index fell to 41 in March from 43 a month ago.
In a recent press release, the British financial institution said that two thirds of those it surveyed were pessimistic about the unemployment situation in Britain.
Nationwide's chief economist, Fionnuala Earley, remained broadly upbeat. "Overall consumer confidence has remained broadly stable since the start of the year," she said.
But she conceded that many will feel insecure about their jobs.
"Feelings about the current labor market have weakened and further reports of job losses are likely to have affected consumers' views of this," Earley said.
The rise in the price of crude may not be sustainable however. Early trading on Easter Monday in Asia saw a fall in the price perbarrel. Oil prices fell to below 52 dollars a barrel after the International Energy Agency said it expected global crude demand to drop this year.
OPEC, the Organization of Petroleum Exporting Countries, has cut oil production since September, and does not expect the price to exceed 75 dollars a barrel in the coming year.
"OPEC believes the current price is not sustainable for exploration," one media business analyst, who asked not to be named, told Xinhua. "They want a price of 60 to 70 dollars."
Iran, one of the world's major oil producers, has indicated that crude prices may reach 60 dollars per barrel by the third quarter of 2009. But the OPEC member has said that the price needs to level at 80 dollars in order to secure future supply.
Gholamhossein Nozari, Iran's oil minister, said Sunday that "with 75 to 80 dollars per barrel... producers can secure the future of energy supply in the world."
Though OPEC is considering making cuts in supply, non-OPEC countries may upset the status quo.
"It seems that whenever OPEC members cut output, non-OPEC members increase it. These two (groups) should cooperate with each other to stabilize the market," Nozari said.
— Xinhua