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5p fuel duty cut already Shetland-wide

Shetland had a three week head start on the government's 5p fuel duty rebate.

DRIVERS in Shetland should not expect a 5p cut in the price of fuel on Thursday when the coalition government’s rebate is due to come into force.

All but a handful of petrol stations throughout the islands reduced their fuel prices three weeks ago following the lead set by Ollaberry and Hillswick shops, in Northmavine.

The rebate has since been cancelled out by a rise of 4p and 4.5p on diesel and petrol, plus the extra VAT charged on that.

Other remote parts of Scotland have not applied the rebate early, meaning Shetland has been enjoying cheaper fuel than other island communities.

Sam Chambers, chairman of GB Oils, whose brand Scottish Fuels supplies all Shetland’s fuel stations, strenuously denied charges that his company is “profiteering”.

He told a meeting in Stornoway one month ago that his firm made an average of 2.6p per litre gross profit on diesel in Lewis that year, from which it had to cover all its operating costs. The gross profit on petrol was higher, but still less than 5p per litre, he said.

Profits in other areas varied, but he said that they were equivalent and only increased to cover the extra cost of delivery to different parts of Scotland.

“If you deliver 30,000 litres it will be a different price than if you’re delivering 500 litres,” he explained. “If you shop at a village store you pay more for a tin of beans than you do in a supermarket.”

He added that the profit margin his company made had not increased since they took over distribution in the Scottish islands from BP in April 2007.

Mr Chambers, who attends Shetland Islands Council’s external transport forum on 19 March, said GB Oils was co-operating fully with the Office of Fair Trading’s inquiry into the cost of living in remote parts of the UK.

“We make a fair and reasonable margin and we are quite happy for anyone to scrutinise our books,” he said.

“If you want cheaper fuel in Shetland, phone up Tesco and ask them to open a petrol station. If they want to come they can come, at the end of the day we will only survive if people buy our product.”

However one Lerwick fuel retailer warned that if Tesco started selling fuel at a cheaper price, others would probably have to close their doors.

The government introduced the fuel duty rebate two months ago for retailers to protect their cash flow, so they would be able to start claiming money back by the time they were supposed to sell fuel more cheaply on 1 March.

However the bulk of Shetland’s petrol stations were forced to apply the fuel duty rebate early when Leasks’ petrol station at Gremista, the only one run by Scottish Fuels directly, followed the lead of Hillswick and Ollaberry and dropped their prices on 10 February.

Mark Robinson, of Robinson & Morrison in Weisdale, said: “When Leasks decided to follow suit we had no choice. We generally match their prices exactly because if we are different by more than 1p, we will lose about one third of our trade, which comes to be a lot.”

Due to the early price cut in Shetland, which does not appear to have been reciprocated elsewhere in Scotland, some retailers have been suffering.

Mr Robinson said it had already effected their cash flow, and they were only part filling their tanks to help ease the pressure. “I am happy customers have benefitted, but for us it will make it tight until revenue and customs give us the money back.”

He said he had suggested it would have been more effective to apply the duty cut at the fuel depot rather than the petrol pump.

Meanwhile drivers inevitably remain unhappy with the ever rising fuel prices.

ZetTrans chairman Allan Wishart spoke for many when he said: “It seems very coincidental that the price goes up by 5p the same week the government give a 5p derogation, we need an explanation for that. Has the same increase occurred on the mainland?”

Mr Robinson said he understood the price in Aberdeen was just 6p less than Shetland since the rebate was applied. “It’s done what it’s supposed to do, reduced the difference between here and Aberdeen,” he said.

However Shetland MSP Tavish Scott said unleaded in Aberdeen was 135p, 11p cheaper than Shetland.

“If Shetlanders don’t see a 5p fall in the difference between Aberdeen and Lerwick then somebody is profiteering at local motorists’ expense,” he said.

Experts say the worldwide increase in oil prices is connected to global markets reacting to the bloodshed in Syria and threats of a conflict between Israel and Iran over nuclear energy.

Financial speculators who make money by trading on the price of fuel are making a fortune pushing up the price by stoking fears over the crises in the Middle East.

Such speculators, who never actually take possession of the oil they are trading in, now account for 64 per cent of the market, with just one third being accounted for by producers and end users.

Observers say the blame cannot be placed at the door of declining oil reserves or increasing demand from the likes of China.