Nice roadtrip 🙂
We live rural, so lots of miles plus on oil at home - keep dropping please
Plus one!
Competition? If the price didn't drop that would be an indication of price fixing.
Not necessarily.
They don't exist in a bubble. Sainsburys/BP/Tesco know how much Shell/Asda/Esso are charging for fuel.
(The numbers below are purely to show the point and don't represent any real profit/margin figures)
Let's say the market has 'settled' when the 'cost price' of fuel (inc tax) is £1.20/l and we're all selling for £1.40/l and making 20p profit on the fuel and tax to cover our costs and provide a tiny bit of profit.
Then the price of crude falls, which has a knock on effect of lowering the 'cost' to the petrol stations to £1/l.
I *could* lower my price, immediately, to £1.20, so I've still got the 20p to cover my costs. But why not wait for a bit? If I manage an extra day at £1.40 then that's an extra day of 40p/l profit rather than 20p/l.
"But what about market share?"
Aha, so I want to steal some market share, take customers from my competitors and so get more money that way. The profit per litre might be the same but if I'm selling twice as many litres because everyone is coming to me rather than BP down the road....
Except, as soon as I lower my prices, all of my competitors do too. 30 minutes ago we were all making 40p per litre profit. But I got greedy, tried to steal some customers by lowering my prices, everyone else (sensibly) responded by lowering their prices too, so now I've got the same market share as before my genius market share idea, but it's making a smaller profit.
^ Oligopoly. See also banks, domestic power suppliers etc.
Surely that depends on how easy/cheap Russian oil is to extract ? I have no idea the cost of extracting Russian oil.It's definitely bad news for difficult/expensive oil extraction such as shale and North Sea oil.
Shale isn't that difficult, in general the pattern over the last decade has been to look for and extract harder to reach reserves (deep water etc). Shale is a new market entirely, at the cheap end it's $25 per barel equivelent.
If anything the USA is behind these moves as they're far more effective than sanctions at bringing down governments.
Russian or Iranian oil isn't nececeraly expensive to extract, but their economies are built on that ballancing the budget (a bit like the argument behind Soctish devolution). Typicaly the less you're able to trade other goods/services with the rest of the world (i.e. we/'the west' imposed sanctions) the more dependant you are on oil exports. Hence why you see numbers like Russia/Iran needing $110/$130 per barrel, it's not the cost of extraction (which is probably $20-$30), it's the ~$90 they need on top of that to keep the governments running, taxes low and populations happy.
Nice roadtrip
It is very, I also have family who conveniently set up home in Leeds and Perth which breaks up the journey nicely and last time stopped over in the Lakes which worked out perfectly.
Im trying to encourage my son to move to the South West for a bit of variation 🙂
Typicaly the less you're able to trade other goods/services with the rest of the world (i.e. we/'the west' imposed sanctions) the more dependant you are on oil exports
sanctions on Russia haven't really restricted the ability of private Russian companies to import or export, although finance on major infrastructure has become more tricky. the problem isn't sanctions, the problem is that Russia's economy hasn't diversified enough.
Russian extraction costs ARE high, as are taxes which are fixed (not proportionate and vary with price) - some fields just won't produce, while fields in other markets will keep banging away (at lower profit). there is also a political problem as well as an economic one: Putin (and the Iranian regime) buy off rising middle class expectations with expenditure. that won't be possible if oil revenue falls further - which means pissed off people will demand the fall of the regime...
