Fuel Prices Surge: Supermarket Boss Warns of “Tight” Supplies Amidst Middle East Tensions
The escalating conflict in the Middle East, reportedly sparked by tensions involving Donald Trump and Iran, is having a tangible impact on Australian motorists, with fuel prices soaring to levels not seen in nearly two years. Allan Leighton, the executive chairman of supermarket giant Asda, has issued a stark warning, stating that petrol supplies on some of its forecourts are “tight” as demand begins to outstrip availability.
This situation has arisen as the price of petrol has breached the 150 pence per litre mark, a significant milestone for consumers. The root cause, according to industry analysts, lies in the Strait of Hormuz, a critical global oil transit route through which approximately 20 per cent of the world’s oil passes annually. Iran’s actions in effectively restricting passage through this vital waterway are creating significant disruptions to the global oil supply chain.
Despite statements from Donald Trump suggesting that negotiations to de-escalate the conflict are progressing positively, Iran’s Revolutionary Guards have made it clear that the strait remains “prohibited” to “hostile shipping.” They have further warned that any attempts to transit the waterway will be met with a “harsh response,” indicating no immediate easing of the blockade.
Asda, one of the UK’s largest fuel retailers, is experiencing the effects of this supply-demand imbalance. Mr. Leighton elaborated on the challenges, noting that “supply is tight and we are all trying hard on that.” He stressed that the current issues are “temporary” and that motorists may encounter occasional delays when waiting for deliveries.
An Asda spokesperson confirmed that while all forecourts are receiving “normal fuel deliveries, and sites are operating as usual,” customers might experience brief unavailability of pumps during refilling due to the heightened demand.
Industry Urges Calm Amidst Supply Concerns
Despite these localised supply pressures, industry leaders are urging drivers not to panic or alter their usual refuelling habits. Elizabeth de Jong, the chief of Fuels Industry UK, and Gordon Balmer, the executive director of the Petrol Retailers Association, released a joint statement acknowledging reports of fuel availability issues at a “small number of forecourts for one retailer.” However, they emphasised that “Supply across the UK is flowing normally and there is no need for any change in usual buying habits.”
Accusations of Profiteering and Government Scrutiny
Amidst the rising fuel prices, a controversial debate has emerged, with accusations of profiteering being levelled against both the government and, conversely, fuel retailers. Chancellor Rachel Reeves has been criticised by some business leaders for what they perceive as hypocrisy. While pushing for lower fuel costs for motorists, the government is reportedly benefiting significantly from increased tax revenues due to the higher prices at the pumps.
Allan Leighton was particularly vocal in his criticism, stating that the government has “zero credibility” when discussing profiteering by others. He described the government’s approach as a “disgrace” and a “typical camouflage,” suggesting they are deflecting blame from themselves by pointing fingers at petrol retailers. He argued that ministers should be focusing on initiatives to support job creation for young people rather than engaging in public disputes with businesses.
Kemi Badenoch, alongside other prominent business figures, has also joined the chorus of criticism directed at the government for its increased tax receipts from elevated fuel prices. Lord Wolfson, the boss of Next, has called on the government to avoid profiting from the current crisis. Stuart Machin, the chief executive of M&S, has attributed rising energy bills for businesses to Labour’s green levies.
Retailers Face Abuse Amidst Price Hikes
Mr. Leighton highlighted that Asda has witnessed a surge in demand from drivers reacting to the price volatility. He reiterated that the supply issues have only affected “the odd pump” at a limited number of its petrol forecourts, clarifying that no forecourts have experienced a complete shortage of fuel.
The rising cost of oil, a fundamental component of petrol and diesel, has instilled fear in both businesses and families. Industries heavily reliant on fuel, such as taxi services and haulage companies, are being compelled to implement drastic measures, including price increases and emergency fuel surcharges.
Several forecourt owners have reported a decline in trade and have expressed frustration with Chancellor Rachel Reeves’s public statements, which they claim have incited abuse directed at their staff by customers alleging profiteering.
Calls for Government Intervention: Fuel Duty and VAT
Businesses and industry groups are urging the government to reconsider its planned 5p fuel duty increase and to reduce the Value Added Tax (VAT) on fuel. Currently, VAT is charged at 20 per cent, meaning that as pump prices climb, the Treasury collects a larger proportion of the revenue. According to the RAC, the average margin retained by fuel retailers on a litre of petrol is approximately 6 per cent.
Since the onset of the recent conflict, petrol prices have seen an increase of around 17p per litre, with diesel prices rising by approximately 30p per litre. This translates to an additional £300 million expenditure for UK drivers, based on recent analysis.
In the face of the ongoing cost of living crisis, there are mounting calls for the government to cancel the impending 5p increase in fuel duty.
Goran Raven, whose family has operated a petrol forecourt in Romford for four generations, accused the government of “profiteering” from the crisis. He stated that ministerial comments have exacerbated the abuse faced by his staff. Mr. Raven reported a 25 per cent drop in transactions compared to a typical Monday before the conflict began. He expressed the necessity of “enormous” price increases simply to cover staff wages and maintain business operations.
Mr. Raven, whose business maintains a consistent 7p per litre margin regardless of wholesale price fluctuations, described the abuse his staff has endured as “vile.” He specifically referenced remarks made by Chancellor Rachel Reeves regarding alleged “profiteering” by fuel firms. He argued that the Treasury is the true beneficiary of price increases due to the VAT component. “They could take the pain away from everybody but they don’t want to,” he asserted.
He implored the government to cancel the planned autumn fuel duty rise and to reduce the VAT rate for the industry, believing that such actions would alleviate the abuse his staff faces.
Darren Briggs, Director at Ascona Group, which manages around 70 forecourts across the UK, echoed these sentiments. He dismissed claims of profiteering as “lazy,” “uneducated,” and “ill-informed,” arguing that the government fails to comprehend the intricacies of the fuel industry. He advocated for an immediate VAT reduction on petrol and diesel, which he believes could be directly passed on to consumers, offering immediate relief. Mr. Briggs noted a 20 per cent increase in instances of staff abuse at his stations since the conflict began.
Government’s Stance and Broader Economic Impacts
The Treasury’s position is understood to be that while increased fuel prices do lead to higher VAT revenue, the subsequent reduction in families’ disposable income may result in decreased revenue in other sectors.
The ripple effects of the fuel price surge are being felt across various industries. Taxi firms are being forced to increase their fares. Apollo Taxis in Wrexham has implemented a 10 per cent fare increase, while Stanley Taxis in County Durham has raised its minimum fare and added an extra 12p per mile.
Kate Lester, owner of courier firm Diamond Logistics, highlighted the additional costs her business is incurring, including emergency fuel charges from carriers and haulers. She has observed fuel costs rise by over 25 per cent, equating to an additional £45 per van tank. Simultaneously, her business is experiencing a decline in demand as consumers reduce non-essential spending. Ms. Lester criticised the government’s handling of business challenges, stating, “This Government has been hellish for business full stop.” She urged for government support on fuel duty, emphasising its critical role in the nation’s logistics.
Stephen Bennett, of Bennett’s Haulage, revealed that his fleet of 12 HGVs now incurs an extra £4,000 per week in fuel costs. As a third-generation haulier, he has had to implement unprecedented measures. Initially absorbing the costs, his company introduced a 7 per cent emergency fuel surcharge for the first time in its history. Mr. Bennett expressed a desire for a fuel duty cut, stating, “Short of owning your own oil refinery there’s not anything we can do to change diesel prices but I would like to see a cut to fuel duty.” He anticipates diesel prices could exceed £2 per litre by next week.
Richard Smith, Managing Director of the Road Haulage Association, described the Chancellor’s recent statement as a “missed opportunity” to cut fuel duty and provide reassurance to key sectors. He stressed that scrutiny of fuel prices must extend beyond the forecourt. “Our essential industry is a key economic enabler. That is why we have been calling for the planned fuel duty rise to be scrapped, along with plans to link it to inflation. A hike in fuel tax would be a hammer blow for many firms,” he stated. The association is seeking an urgent meeting with the Chancellor to discuss these critical matters.
