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Thursday, October 28, 2021

Great Britain. What caused the fuel crisis? Reasons, reasons

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Closed stations, long lines in front of the open ones, gas rationing and ever higher prices. The government assures that there is no shortage of fuels and blames consumers for the situation. What is the origin of the fuel crisis in Great Britain and what influenced it? We explain.

Fuel crisis in the UK – what is happening?

The price of gasoline in the UK has risen from its highest level in eight years. The average price of a liter of unleaded gasoline on Sunday was £ 1.37, the highest since September 2013, RAC, which provides roadside assistance and other driver services, said Tuesday.

At the same time, the largest fuel companies closed some stations in the UK, and introduced gasoline quotas due to problems with fuel supplies caused by the lack of tanker drivers. At the same time was observed higher than usual demand for fuel, which caused queues. The BBC station said on Tuesday that up to 150 military drivers will help deliver fuel to the stations.

Both the UK government and the oil industry say the current gas station shortages are entirely the result of consumer behavior, after oil companies warned the government that they were considering rationing supplies due to a shortage of tanker drivers. However, the situation seems more complicated.

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Some stations in the UK are without fuelPAP / EPA / NEIL HALL

Brexit, COVID-19 and the lack of drivers in the UK

– It was said that the world has changed and our contact and consumption behavior has changed. It is not so – we are going back to old habits and high consumption – said Dr. Joanna Maćkowiak-Pandera, president of Forum Energii, in an interview with TVN24 Biznes.

– Fiscal impulses, or government support, were distributed chaotically to sectors and, among other things, this triggered a sharp increase in demand for various commodities in many areas. Prices are rising rapidly in many segments of the economy. The price of gas has risen by 150 percent, coal by 300 percent, and oil prices are rising, she added.

She recalled that last year many countries introduced lockdowns and the demand for the production of fuels: oil, gas and coal fell sharply. In her opinion, it was especially painful and visible in the case of the oil market, where prices turned negative. “The demand collapsed and it turned the other way right now,” she explained.

– In the case of the fuel market there are also several other factors. In Great Britain, the biggest impact is the implementation of the Brexit agreement, which was not fully thought out and planned. It was a political decision and these effects are only now visible as they affect other areas, the labor market, said Maćkowiak-Pandera.

According to representatives of the transport industry, there is a shortage of approx. 100 thousand jobs in Great Britain. truck drivers. After Brexit, around 25,000 people left the UK. drivers, and the COVID-19 pandemic suspended the process of obtaining qualifications by new employees for almost a year. The British government has announced that it will grant up to 5,000. temporary three-month visas for tanker drivers and supply drivers to avoid a shortage of goods before Christmas. According to industry employees, the offer is not very attractive, because three months is too short to be profitable.

– I do not see a global problem, only a local, internal problem resulting from securing supplies, but not at the production level, but at the logistics level. It’s not like refineries don’t have fuel. We are not talking about the problem with the supply (quantity) of fuels on the market, but about the problem of supplies from the producer to the petrol stations. This is a situation to be resolved. There are questions about what means and how long it will take – Urszula Cieślak, an analyst at Biuro Maklerskie Reflex, said in an interview with TVN24 Biznes.

She added that “the longer the state of uncertainty and nervousness lasts, the more negatively this may translate into fuel prices”.

Also, according to Maćkowiak-Pandera, “in Great Britain we are dealing with temporary problems with fuel supplies”. – The panic effect is working, but the industry is able to handle it. We can see on the example of toilet paper that was missing during a pandemic how individual images can fuel demand. Periods of shortage may occur, but the market regulates this. Prices are rising and this motivates us to act – she explained.

Then she added that “this is definitely a temporary phenomenon, because there was no shortage of oil all over the world, but in one country”, and “the British government has made a number of interventions to help in this.”

There are long lines in front of the othersPAP / EPA / NEIL HALL

Panic and fuel shortages in the UK

Anxiety, anxiety and more anxiety – these are the main causes of the fuel crisis in the UK, also according to Cathrine Jansson-Boyd, a lecturer in consumer psychology at Anglia Ruskin University. Panic buying is usually fueled by uncertainty. We did a lot of research during the pandemic that shows that people had a high level of anxiety without being aware of it. This made fertile ground for people to be more concerned about this issue as well, the expert said in an interview with CNBC.

Jansson-Boyd added that there was a FOMO effect, i.e. the fear of missing something when people saw reports and photos of others queuing for gas. – People started to wonder that if everyone else is doing it, then if they should do it too. They still hear about it, but see no solution. It was the same with toilet paper at the start of the pandemic. No solution was offered, so people felt they had to do something. Even if these actions are not rational, we feel that if we don’t do something, it will be wrong. So people buy things that they don’t even need – explained the psychologist.

– The government says not to panic, because there are no shortages, but people do not hear the solution. What people need to calm down is to ensure that the problem is resolved. Unfortunately, it doesn’t work out, which adds to the anxiety and causes people to continue to panic irritably, she said.

Dominik Piehlmaier, Lecturer in Marketing at the University of Sussex Business School, thinks the same. In an interview with CNBC, he stressed that people go to gas stations and wait for hours just because they are worried. Piehlmaier co-led an experiment during a pandemic to explain what prompts people to panic when shopping. It turned out that simply showing pictures of empty shelves in a store is enough to increase the level of anxiety and perceived threat.

– Seeing is believing, so when people see these pictures, it causes a reaction. The intensity of the reaction depends on whether the person has ever found themselves in a similar situation, in which they felt vulnerable and helpless, or if they felt that they were overwhelmed by this one and did not have the strength to overcome it. The government can say what it wants, but as long as the images are there, it will provoke a reaction, Piehlmaier said.

As he explained, images in the media or on social platforms have a greater impact than what politicians say, because they have seen this situation with their own eyes and it is difficult to forget about it.

On Tuesday, British Transport Minister Grant Shapps said the situation at the stations was slowly normalizing. “We are starting to see the panicky buying fading away and there are more types of fuel in more stations,” he told reporters.

The fuel crisis in the UKPAP / EPA / NEIL HALL

Rising prices of fuels and other raw materials

Even if part of the confusion observed in the UK can be explained by the behavior of drivers, the rise in prices is also more fundamental. – What is happening in all European Union countries is the disruption of the energy market – from oil, to gas and coal. The prices of all fossil resources are rising. It is hard to expect a big drop before winter. Due to the economic rebound, energy resources are scarce. There is also a correct theory that this situation is being used by Gazprom and Russia to destabilize the European Union politically. This certainly causes great concern and supports the theory that it is all due to climate policy, said Maćkowiak-Pandera.

She stressed that “of course, climate policy also affects prices, because we are paying the costs of environmental pollution.”

The president of Forum Energii added that also when it comes to Poland, “electricity prices have increased”, but still “current wholesale electricity prices are among the lowest in the European Union”. She explained that “our price increase is caused by higher CO2 prices”. – In markets such as the United Kingdom, Spain, France and Germany, the main factor driving the increase in wholesale electricity prices is gas prices. This is due to the construction of the market, she said.

Cieślak also pointed out that the higher prices at the stations are also the result of rising crude oil prices. – Rising processing and operating costs, higher energy costs mean that fuel prices are rising. It is the same with us. In the UK, the increase in prices may be higher due to the risk premium and concerns that it will not be possible to refuel – she explained.

As she added, “the economic recovery after a pandemic is characterized by rising costs.” – In the case of energy, it is not just a pandemic, but regulations related to climate protection and the climate package. The difficult situation with gas and gas stocks before the winter season also casts a shadow on oil prices, explained the analyst BM Reflex.

Higher commodity prices mean higher energy prices, which in turn lead to higher costs in other sectors. According to Maćkowiak-Pandera, “we have achieved record levels in the wholesale markets in terms of electricity.”

– We need an intervention of the European Commission, which should monitor, react and explain the reasons for the increase in gas and coal prices, but also in CO2 prices, which have risen sharply. It should control the market behavior of energy and gas sellers, because market disturbance is conducive to abuses. We need to check whether market participants are behaving fairly or not taking advantage of this destabilized, pandemic situation – she emphasized.

Author:Krzysztof Krzykowski

Main photo source: PAP / EPA / NEIL HALL

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