Sunday, June 15, 2008

History of petrol prices

I've been looking into how the real terms cost of petrol has changed over time. The figures in the extract below come from EK Williams, accountants and business advisors. They make interesting reading: £1.85/litre in 1916; £1.16/litre in 1957; £1.02/litre in both 1973 and 1979, (figures indexed to 2007's £...). Comments on the figures and EK Williams view/interpretation most welcome. These things spring out of their comments for me: fuel prices could go even higher; we've been desperate for affordable, high quality public transport for many decades, for transporting people and goods (not news for many people I know!); its vital to our future stability and security of life that we localise our development, supporting local jobs and services in local economies, to minimise the transport costs involved in supplying food and other essentials...

'To take one [admittedly extreme] date: indexed to 2007’s value of the £ sterling, in 1916 a gallon of petrol in the UK cost approximately £8.40 which works out at around £1.85 a litre, and that was before governments had really discovered how much duty and tax they could start putting on the stuff. If that’s too far back, take 1957; ‘only’ fifty years ago, just after the Suez crisis, the UK gallon retailed for £5.26 in today’s money – that’s £1.16 a litre. If that’s still too far back, let’s take a “Life on Mars” trip back to late 1973, around the time of the first modern ‘oil crisis’ following the 1973 Arab-Israeli war; at that point the UK gallon was selling at £4.65 in today’s money, which is equivalent to £1.02 per litre, with a similar figure in 1979 around the time of the US/Iranian Hostage Crisis.'

'Enough history. The fact that today’s fuel prices aren’t uniquely high in real terms doesn’t mean that they won’t bring their own problems. Firstly there’s the general economic impact of fuel pricing; transport costs are an unavoidable necessity for most people, not optional spending. Hence when transport costs go up, and before disposable income has had a chance to follow [i.e. wage inflation..] something has to give. Usually that’ll be retail sales. Some of the big High Street names had already announced their ‘Pre-Christmas Sales’ season in mid-November. A further impact of fuel pricing is due to the fact that virtually all of the goods we buy and sell are transported by road [not that rail or air transport will be immune to oil price rises anyway] and so the cost will go up. Look at that again: customers with less money to spend, suppliers with rising costs; there’s a squeeze somewhere in the middle there – looks like it’s the wholesaler and retailer who’ll be taking the pressure from both directions.'