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Daily Mail: Petrol firms in profiteering row: ‘Shell denies profiteering’

By Ray Massey
5 March 2007

Millions of motorists will pay more for petrol this week in the wake of the tainted fuel chaos. 
PUMPED-UP PRICES: The cost of filling up has risen in parts of the country not affected by tainted fuel supplies

Wholesale prices have surged as Asda, Tesco and Morrisons seek new supplies to replace the petrol that put thousands of cars out of action.

Oil giants have been accused of cashing in with instant rises at the pumps of up to 3p a litre.

It means motorists throughout the country are paying for a problem which mostly affected the South-East of England. The AA said they should be rightly furious if they were ‘being ripped off through profiteering’ by the oil companies.

But last night worried motorists were still shunning supermarket forecourts and queuing at garages charging the higher prices.

Ray Holloway, of the Petrol Retailers’ Association, said it would be the petrol giants such as BP, Shell and Texaco who would benefit from rising prices.

Even if their margins at the forecourts are tight, the industry takes profits at every stage of production – from the moment oil is pumped from the ground to when it is pumped into fuel tanks.

The weekend brought petrol price rises across Britain. The price of unleaded went up by almost 4p a litre, from 87p to 90.9p, at the BP Sunny Lodge garage in Malvern, Worcestershire, on Friday.

At Northwick Service Station in Worcester, unleaded went up 3p to 91.9p. while a Texaco garage in Aylesbury, Bucks, increased its prices from 89.9p a litre to 91.9p.

A BP station at Kinning Park, Glasgow – hundreds of miles from the supermarket problem – increased its unleaded price by nearly 2p to 87.9p. Customers were warned that a further rise was on the way. ‘It is down to contamination,’ said a cashier. Even a filling station at Thurso, in the far north of Scotland, raised its price by 3p a litre, to 94.9p.

But most motorists appeared ready to pay the higher price rather than return to the supermarket pumps. In Leighton Buzzard, Buckinghamshire, a Total-branded forecourt selling unleaded at 91.9p was still crowded with drivers. A Morrisons forecourt 250 yards away, offering unleaded at 86.9p, was deserted.

Petrol for Britain is bought and sold wholesale on international ‘spot’ markets for North West Europe. Prices there were pushed up by the unexpected immediate demand from UK supermarkets for an estimated 50m extra litres to replace tainted stock. This, in turn, was passed on to the pumps.

Mr Holloway said: ‘The extra demand – with limited short-term extra supply – means anyone else buying petrol will also have to pay the higher price. It’s almost instantaneous. As soon as the new and more expensive fuel is delivered, the price goes up. Whoever has the oil to sell – and this is most likely the major oil companies – will ultimately see the extra profits pour into their coffers.’

He added: ‘Motorists outside the South- East of England who thought they might have got away trouble-free will now – from Lands End to John O’Groats – pay the price of the contamination through higher pump prices.’

AA spokesman Luke Bosdet said: ‘It appears someone is taking the Mickey. Putting up prices to make a fast buck is completely unjustified. It adds insult to injury. Sometimes garages increase the price to protect stocks from a sudden run. But if anyone has upped the price outside the areas where the problems have been – say two miles from a Tesco or Morrisons store – then they are milking the system’.

Last month BP announced profits of £11.34bn for last year, despite a fall of 12% for the final three months. The company was making profits at the rate of £31m a day. Shell’s profits hit £12.9bn – £35m a day. But oil companies last night denied cashing in on drivers’ fears about tainted fuel scare.

The UK Petroleum Industry Association said: ‘There is no profiteering. Oil products are priced to the market. Pump prices are usually linked to the price of crude oil or the wholesale price of petrol.’

Shell confirmed there had been price rises at its pumps, but denied ‘profiteering’. It said it was responding to ‘ market conditions’. A spokesman said: ‘Yes, there have been price rises in the market. It varies from place to place. But Shell denies profiteering. At a time of high demand, supply has dropped. Refining capacity is low. Supplies have been driven down by the stock replenishment of supermarket retailers. This has had an impact on wholesale prices. Crude prices are also rising. It is costing us more to buy the product. There’s not enough supply in the market.’

BP said it had not put up prices at any of its 300 company-owned sites, but could not speak for the 600 BP-branded sites owned by dealers. A spokesman said: ‘We deny profiteering. The issue about contamination is an industry-wide issue.’

Mr Holloway also accused supermarkets of ‘cynically’ allowing their customers to fill up with the tainted petrol when though evidence of a problem had emerged a fortnight earlier.

Experts say the cost of compensating drivers for damaged filters could top £10m – with the supermarkets, petrol suppliers and insurers squabbling over who will pay.

The contamination was traced to the Vopak refinery on the Thames Estuary in Essex. It is used by the rival wholesalers Harvest Energy – which supplies Asda – and Greenergy, which supplies Tesco and Morrisons. Greenergy said an additive being used by Harvest Energy in the production of unleaded petrol – believed to be toluene – had been found to contain ‘excess’ levels of silicon, which is used to stop some other fuels frothing.

The cross- contamination meant that customers of Tesco and Morrisons – and not just Asda – were affected. The contaminant damaged delicate oxygen sensors in engine fuel management systems, causing them to switch to emergency settings.

Harvest Energy said the contamination was not found not because routine tests did not cover silicon as it would not normally be in the fuel. The firm said it would carry out such tests in future.

The crisis has led to Tesco emptying unleaded petrol tanks in around 150 forecourts and refilling them with clean fuel. Some 41 Morrison sites and 30 Asda forecourts were also affected.

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