Barton Petroleum’s heating oil prices are dictated by the daily price of oil from the supplier and, as such, prices change quickly. Customer’s therefore benefit from falling prices within a shorter timeframe than say gas and electricity suppliers, whose costs are dictated by bulk purchases that are made many month’s previous in some cases.
Making sure that the savings made by lower oil prices are being passed on to the customer is a subject that is never far away from the news and the Chancellor has recently weighed into the debate this week…
Families should get cheaper household bills and airline tickets because of falling oil and gas prices, George Osborne has said.
The Chancellor has launched a Treasury investigation into whether companies are passing on the benefits to customers of plunging oil and gas prices.
It comes after fuel companies started reducing the price of petrol and diesel following an intervention by Danny Alexander, the Chief Secretary to the Treasury.
A Treasury spokesman said: “The Government is conducting studies of industries like the utilities and the airlines. We are examining if any action needs to be taken.”
One source said that the Chancellor would be watching utilities companies and airlines “like a hawk” in the coming weeks and months to see if they were reducing prices.
If they do not pass on the unprecedented price falls, Mr Osborne could be forced to intervene and formally call on the utilities companies and airlines to reduce prices.
ASDA on Monday announced that it was reducing its petrol and diesel by 2p a litre as the price of oil continued to fall.
Asda customers will pay no more than 107.7p a litre for petrol, with diesel at 114.7p a litre.
Morrisons, Sainsbury’s and Tesco all announced similar fuel price cuts.
Ministers believe petrol prices are now set to fall to below £1 a litre for the first time since 2009.
It follows the recent halving of the oil price, with Brent Crude now costing less than $51 a barrel. Six months ago it cost $115.
Morgan Stanley is forecasting that prices could even briefly fall to as low as $35 a barrel before recovering.
US oil prices on Tuesday were at a five-and-a-half year low of below $48 a barrel, down from nearly $107 in June.
Gas prices for this year are about 27 per cent lower than the equivalent price a year ago, while wholesale electricity prices fell to a two-year low on Monday.
The Chancellor on Tuesday used a meeting of the Cabinet to welcome the fact that pump prices are starting to fall following the reduction in oil prices.
However, sources said that he was “adamant this wasn’t enough”.
Mr Osborne believes that “consumers could feel the benefit in many other ways if the fall in oil and gas price was passed on to final product”, sources added.
A Treasury source said: “We’re going to be watching them like a hawk. So far it has worked with fuel prices. Pump prices are coming down.
“We believe it can work with other industries.”
Downing Street sources said that the Prime Minister backed the investigation and is “very keen” to see falling oil and gas prices reflected in other areas.
Mr Alexander in November wrote to all of the main fuel suppliers and distributors to demand that they pass on the benefits of falling oil prices to customers “as quickly as possible”.
A source close to Mr Alexander said on Tuesday: “Anybody involved in the supply of energy in terms of petrol, diesel, domestic heating, air fares and domestic gas and electricity must make sure they are passing on the reductions in full. And they must be in no doubt that they should do it very quickly.”