Oil market stabilisation gives hope for cheaper petrol

Global oil stabilisation has raised a glimmer of hope motorists may finally see fuel prices coming down at the pumps — or, at least, staying at current levels.

After months of rising prices, the barrel of oil stabilised in March, albeit at a high monthly average of $125.

John Heffernan, a power trader with Bord Gáis Energy, said a combination of factors had contributed to the levelling of the price. “The markets focused less on the potential impact on prices as a result of the tensions between the West and Iran,” he said. “In March the narrative subtly moved to reassure the markets that the world had sufficient reserves to withstand the loss of Iranian crude supplies.”

However, Conor Faughnan of the AA said while the stabilisation was good news his organisation was hopeful “prices will stop getting worse”. Other factors here, he said, meant the price would not necessarily come down.

He pointed out the cost of fuel here is impacted by the euro/dollar exchange rate and that the euro had been weak in recent months.

He added that taxation was also keeping the cost very high. In 2008 when the price of a barrel was over $150, the cost at the pumps was in the €1.30s.

However, due to tax increases by successive governments the fuel pump cost of petrol is €1.66 although the barrel cost is much lower.

Meanwhile, commenting on the Bord Gáis Energy Index, Mr Heffernan said concern continues to be voiced about the potential impact the higher oil prices are having on consumer spending and inflation, and this also helped to ease the escalation in prices seen in the previous two months.

He said a series of mixed economic releases and question marks about the strength of China’s economy also weighed on oil markets as traders consider the viability of the price of a barrel of Brent crude.

Overall, Bord Gáis Energy found a return to milder weather across Continental Europe following the severe February cold snap, pushed wholesale gas and electricity prices down by an average of 3% in March. In relation to natural gas the index recorded an 11% decrease.

“In February, following the severe weather experienced in Europe and concerns over Russian gas supplies, the average day-ahead gas price rose 20%,” Bord Gáis said.

“Weakening demand due to more seasonably mild weather (thus reducing the need to burn gas to heat homes), healthy supplies of gas from LNG terminals and imports from Norway, and relatively high stock levels, all combined to put downward pressure on prices.”

A combination of lower gas and carbon prices, pushed down wholesale electricity prices, though the price of coal rose slightly.

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