Friday, December 10, 2010

Does this count as inflation?

Fuel Costs In Britain Hit Record Level

"Petrol prices have hit a record high in Britain with unleaded costing an average of 121.76p a litre - with further increases in the pipeline, according to the AA". ..But the big question is - why are prices so high when the price of a barrel of crude oil is well below its peak of $145 in July 2008? It now stands at about $90. "The OFT has told Sky News it is not currently investigating fuel prices on either price or competition grounds".

Posted by alan @ 04:04 PM (1300 views)
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7 thoughts on “Does this count as inflation?

  • According to the graph in the article, you can see that the pump price follows the crude price. In fact, the margin seems to be lower now than it was in 2004 whn petrol was 80p/litre.

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  • January 4th – VAT goes up to 20%, so another 2.5% increase…..

    Also let’s not forget fuel is double taxed in the UK, (actual fuel cost+fuel duty {a tax!}) + vat {another tax!} = pump price.

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  • No, it doesn’t count as inflation. Food and energy prices are excluded because they are “volatile”. However, if higher fuel costs feed into other goods & services, then it will count as inflation.

    In 2000, the average price for diesel for the year was 82.02p. In 2010 up to end of November, the average price was 119.16p. (Source: The AA fuel price reports).

    That works out to 3.8% inflation per year. It’s outside the BoE’s 1% to 3% target range, but not massively so. It’s not hyperinflation or even 1970s-style double-digit inflation. But for the BoE it doesn’t matter, as long as flat-screen televisions and Primark clothes are falling in price.

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  • Mish claims that there’s an unusually large amount of speculative money in the commodities futures market, including oil. However he doesn’t think this speculation will unravel unless/until the Fed raises interest rates.

    Mish’s: Investors Hold Biggest Commodity Positions On Record; Viral Nonsense About Silver
    The Commodity Futures Trading Commission says futures positions in commodities are 17% higher now than when the commodity index peaked in June 2008.

    Investors increased their bullish bets on crude oil by 24% since June 2008 and now represent 16% of the market, up from 13% just over two years ago. Bets in the copper market are up 58% and for silver they are up 52%, according to the CFTC data.

    “Speculative money from the likes of hedge funds, index funds and pension funds is coming into the commodity markets at a blistering pace.”

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  • Thanks Drewster – everyone’s a speculator these days! Pity the UK finds manufacturing so uninteresting, the UK really does need some things for our country to export.

    I thought the most interesting part of the article related to the unleaded price compared to a barrel of oil $90. If the barrel goes up by 50% it will still be way below its peak, but would have a stunning effect on the pump price.

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  • You guys are worried about petrol prices now? lol

    You have no idea how much higher prices will rocket to.

    Hyperinflation is closing in on a global scale.

    I hope the deflationists will finally wake up and shut up when this spike happens.

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