UK: High prices force drivers off the roads

What does the oil refinery closure mean for petrol prices?

One of the UK’s leading oil refineries for London and the South East has closed, leaving drivers in the dark over a potential fuel shortage.

Money Expert,

2 February, 2012

The Coryton refinery in Essex was closed last month by its Swiss owners, Petroplus, as the company’s shares were suspended from trading on the Swiss market. Petroplus filed for insolvency on the Coryton refinery after they failed to secure a bank loan to cover their outstanding debts.

After falling into administration the oil refinery closed with immediate effect. This has sparked industry fears over fuel supplies.

This comes at a time when petrol prices are soaring to record highs. Diesel prices are set to rise by 3p, according to industry experts, bringing the total cost per litre to £1. 45. This could cost consumers £100 to fill up a typical family saloon with a 70-litre tank.

Record petrol prices were seen in May last year when the cost of petrol per litre shot up to 137.43p and diesel increased to 145.04p a litre. The average petrol price now stands at 133.89 p per litre and is edging its way up.

The Coryton oil refinery was once owned by BP and produced up to 220,000 barrels of crude oil a day, generating 20% of the total fuel supply to the South East of England. The site also supplies 10% of the UK’s petrol and diesel, meaning that the closure could spark a rise in the cost of petrol. 

  The Swiss company operates a range oil refineries across Europe which have also been declared bankrupt. This includes Petit Couronne in France, Antwerp in Belgium and Cressier in Switzerland.

Steven Pearson, Joint Administrator at the global professional services firm, PricewaterhouseCoopers, said in a statement;

"Our immediate priority is to continue to operate the Coryton refinery and the Teesside storage business, without disruption while the financial position is clarified and restructuring options are explored.

“Over coming days we intend to commence discussions with a number of parties including customers, employees, the creditors and the Government to secure the future of the Coryton and Teesside sites."

It was recently reported that work was set to continue at the refinery after a new shipment was delivered.

However, administrators at Coryton warned that the new shipment would only extend the refinery’s operations for a few days.

Speaking to the BBC, Mr. Pearson said; "The costs of operating the site are very significant and this means we are living from hand to mouth

.

"We cannot guarantee anything at this stage, but at least we have extended the period which the site can operate for by a number of days. This extra time is critical in maximising our options."

Drivers became panicked and raced to petrol stations to fill their tanks as rumours of a petrol crisis emerged. 

High prices force drivers off the roads

Rising petrol prices are one of the largest contributing factors which are keeping drivers at bay. According to the latest figures, one in five motorists has been forced off the road as a result.

Insurance firm Hastings Direct has revealed that a massive 78% of motorists say driving costs have seriously influenced their habits and how often they take to the roads.

With prices continuing to rise, it may come as no surprise that one in three drivers are considering the idea of purchasing a Hybrid or Electric car as their next vehicle to reduce fuel costs.

“Taking the right actions - reducing mileage and driving safely - can help motorists cut the cost of their insurance and their fuel bills, but ultimately motorists cannot and will not keep be able to keep on paying higher and higher petrol prices," commented Tobias van der Meer, Managing Director of Hastings Direct. 

A fifth of drivers said they would give up their car completely if petrol prices hit £2 per litre. Now high prices are forcing drivers to consider the length of their journeys more carefully. The research found that 74% of motorists have cut down on using their car and nearly half of them (49%) have cut back by at least 25 miles each week.

The cost of petrol is one particular issue which motorists do not have a great deal of control over. However, there are other ways to reduce costs such as shopping around for a cheaper deal on your car insurance.

Supermarkets are currently engaged in a petrol price war and Tesco have firmly thrown down the gauntlet by knocking off 10p per litre for fuel for every customer who spends more than £60 in-store.

This will come as a welcome relief for families who are finding things tough. However, they will have to wait until 5th February to get the discount, which will last for approximately 2 weeks