With over 100 years of experience in the fuel industry, we believe there is no question or problem that Portland cannot answer or help you solve. We want to hear your questions and issues with regards fuel buying, fuel quality, fuel consumption, petrol forecourts, grades of fuel, refining etc, etc, etc. The list really is endless and we would like you the fuel user to test us so we can help you!
Feel free to send us a question. We will publish it on this page along with the best answer we can give. Please indicate if you wish to remain anonymous and we will publish the question without your name.
Read our forum questions below:
July 22, 2011 In your answer to June's Fuel Forum question, you mention the impact of commodity speculation on oil prices. Truthfully, what is the impact of speculation? Is it greater or less than popular perception?
Using the word truthfully makes you sound like our Mums! The truth is that speculators can only ever fan the flames of a commodity boom or bust. This does not underestimate their impact, but simply means the conditions have to already exist, such that speculators can profit and therefore affect market movements. The thought that speculators can push prices up to the levels that we have seen recently, flies in the face of world economic data, ie, that demand in places like China and India is in danger of running away from supply.
A more relevant factor to note is the general access to oil markets that now exists. It was only as recently as the early 1990’s, that oil markets were the business of just a select band of oil companies. Banks weren’t on the scene, let alone hedge funds. Clearly, this was an unsustainable position and one that lent itself to accusations of price fixing and collusion. So the markets were opened up and suddenly a whole world of people who didn’t really understand the fundamentals of oil, were pumping more and more money into the market. The unintended consequences of this development were inevitable distortions in the market, that did not reflect the actual fundamentals of supply and demand. For example, the suspicion that a hedge fund will be buying $billions of forward contracts, will often have an equivalent short-term impact to an oil field closure or discovery.
So it is a complex picture, but business cemeteries are full of companies and people who thought they were bigger than the market itself. The truth is that no-one can “corner” a market as vast as oil, so in the long-run, supply and demand will remain the main price drivers.
This month’s question comes from David in Lichfield
July 21, 2011 Of the 9,000 petrol stations in the UK, what percentage sell Tunnock's Tea Cakes? And does Portland believe regulation should be introduced to make their sale mandatory across all forecourts?
We couldn’t say this was an area of particular expertise for us Mark, but we have contacted the British Federation of Teacake Retailers and they don’t exist. So we can only surmise that Tunnock’s Teacakes (or equivalent) can be purchased at all petrol retail sites in the UK. With regard regulation, we generally oppose red-tape and feel that forcing tea-cake sales might take the biscuit (…sorry!).
Mark (genuinely) from London
June 7, 2011 I was really interested to read May's Oil Market Report and see the biggest drops in diesel price over the last 20 years. Do you have a similar graph, showing the biggest movements in price either up or down?
Your wish is our command Finley. The attached graph showing the biggest movements in the price of diesel in the last 20 years. Readers of the May report will once again note that all the biggest movements in diesel have occurred in the last 10 years. As the May report stated, much of this is due to the high price of fuel, which means that swings in price have higher absolute values (ie, a 10% movement on 20ppl is 2ppl, whereas at 50ppl the same swing is worth 5ppl). However, the fact that the boom in commodity speculation coincides with this last 10 year period, does little to remove the suspicions of conspiracy theorists who feel that market manipulation is behind fuel price volatility.
The other interesting point to note from the graph is not so much what it shows, but the events that fail to feature. Traditionally viewed “game-changing” price shifts, such as those following 9/11, do not even make an appearance. Nor does the first or second Gulf War, or indeed the “massive increases” post Hurricane Katrina (as the press at the time reported them). It is a strange world indeed when “tension on the Iraq-Turkey border”, impacts the oil markets more than an event that knocked out 40% of the US’s oil production capacity.
From Finley in sunny Cornwall, comes the following question
April 5, 2011 A work colleague told me that America produces more Crude Oil than Saudi Arabia. Surely this cannot be correct?
Your colleague is correct – allow him / her an extra visit to the office biscuit tin. America does produce more oil than Saudi Arabia, but it is also uses more oil than Saudi by a huge factor. Therefore, the US not only produces huge amounts of oil for its own consumption, but also heaviliy relies on imports, most notably from Saudi Arablia. So Saudi Arablia is actually the biggest exporter of oil in the world, but not the biggest producer. Saudi’s large exports are in part a result of its huge reserves, but equally a function of its low population / low internal demand. So credit to your colleague, but perhaps you could snap the biscuit tin shut on his / her fingers with this fact; Russia is the biggest oil producer in the world and this is illustrated on the attached graph.
Also interesting to note on the graph is just how reliant China is on foreign imports of oil (far more reliant than the US) – they consume almost 10 times the amount of oil as they produce.
March 9, 2011 Why is oil traded in tonnes and not litres?
This question takes us back to the old science teacher question; “what is heavier – a tonne of lead or a tonne of feathers?”. The answer of course is that they are both the same weight. After all, a tonne is a tonne – it’s just you need a lot more feathers to make up a tonne than you do lead! So fuel is traded on the same basis, because all grades of fuel have differing weights (ie, density). For example, petrol is lighter than jet fuel, which in turn is lighter than diesel, which is lighter than bitumen and so on. So when a trader buys 10,000 tonnes of fuel he or she knows that they will receive a consistent weight of product, irrespective of how many litres makes up that tonnage.
In addition, there is another practical reason as to why oil is traded in tonnes and that is that liquids contract when they cool. So if a buyer in Sweden buys 10m litres of petrol from the south of France, loads it onto a ship and then sails it to the cooler climate of Stockholm, the product will have contracted by the time it arrives. Consequently, the buyer will receive less than the 10m litres purchased. However, if the buyer has bought the product in tonnes, 10,000 tonnes of petrol in the Mediterranean will still be 10,000 tonnes of petrol by the time it arrives in the Baltic, meaning that on paper at least, the buyer has not lost any of the volume purchased.
Duncan from Truro asked the following question
February 16, 2011 Why is there such a difference in price between Brent Crude and West Texas Intermediate (WTI)?
Technically speaking, Brent crude is able to produce greater amounts of diesel and jet fuel, which have greater world-wide demand than the petrol rich WTI. Nonetheless, both grades should show a similar price, as they are both used as markers for world crude prices. Increasingly though, WTI is becoming an indicator only of North American markets and in particular, the record high inventory position at Cushing Pipeline Terminal in Oklahoma.
The reasons for these high stock levels are myriad, but the sagging US economy, limited pipeline access out of Cushing and a wish by the US Petroleum Reserve to build strategic stock all play their part. Brent on the other hand, reflects booming oil demand outside of the US. In addition, physical supply is not limited by any landlocked oil terminal and the product index has been well marketed by London’s Petroleum Exchange, so that it really has no serious competitor on world oil markets.
A question from Douglas in Hackney