Fuel discount

It would be utterly churlish not to welcome the five pence per litre discount on fuel that has been announced  today.

But.

Welcome as it may be, it is very difficult to understand how it is going to be delivered in an effective manner, and five pence per litre will not go a huge way towards resolving the enormous price differential between the islands and the mainland.

What particularly annoys me is the modesty of aspiration of the various political parties seeking to provide a minor plaster instead of trying to solve the gaping wound that is the vicious circle of rural depopulation.

Like many of the residents of the islands, I remain to be convinced that we will actually see a narrowing of the price differential by anywhere near the five pence, and I think the devil in the detail will be the publication of the manual for the scheme which I - and many others -  will no doubt be reading in great detail.

The price of fuel

Everyone is complaining, and getting on the band wagon, but no-one seems to have any sensible suggestions about how to ensure that there is no profiteering or price fixing bey either the sole supplier, nor by the individual petrol stations.

Until now.

The problem is that cutting the price by subsidising the petrol stations is going to make many of them unviable, as the impact on their cash flow will be very severe whilst they wait for the refunds from the Government.

I've previously suggested that Transport Scotland can be used to deliver the subsidies partly in advance and partly in arrears, in much the same way that they rebate Fuel Duty to bus operators.

Unfortunately, the Scottish Government seem not to want to get involved, and political point scoring is higher up the agenda of our parliamentarians than actually coming up with a working answer.


This is the cheapest and easiest solution but one which requires the two parliaments to agree, and for those reasons, the politicians won't let it happen.

Option 2 is much more expensive, but gives a long term solution to additional issues.

The Council (or HIE or the Scottish Government) build new fuel tanks at Arnish and announce the closure of the oil depot in the centre of town for Health and Safety reasons.  As well as sheer aesthetics.  The tanks are then put out for a 5-year lease to anyone, with tenderers asked to deliver fuel to Lewis on the basis of ex-Grangemouth +x% or xp per litre.  That's the delivery price on the island, and the winner bidder has to cover their costs inside that margin on an open-books basis.

To control the petrol stations, the Comhairle need to put their supply of petrol out to tender on an annual basis and to return to publicising the price of petrol at the various filling stations, thereby encouraging the passing on the maximum savings.

We have monopolies and oligopolies of supply here.  We can't break that structure (easily) but by changing the relationship between the parties - by giving the public the maximum information and by using economic levers to discourage bad behaviour, there is the opportunity to maximise the return for us all.

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I know the situation in Uist will be unaffected by this change, at least immediately.

There is also an issue about the discounts each petrol station has negotiated from their supplier. 

Finally, the last thing we want is any more station closures, especially in rural areas.  This might mean a flat delivery charge for anywhere in the islands to protect rural stations, which means slightly higher prices in Stornoway and lower outside. 

Owning a petrol station is not a licence to print money: there's a tiny margin so you need a huge volume.  We are that volume.

Fuel Prices

Our MP is giving the UK Government a kicking for not doing anything about fuel prices.

Just what has he done to try to persuade the Scottish Government to do something about fuel prices, given that they have the power, ability and structures to allow this to happen?

My understanding is that he has spoken to John Swinney, and been told that the Scottish Government can't/won't find the money to subsidise fuel in the Western Isles.

As the press release could have read....

The Scottish Government’s one size fits all policy has, once again, failed us horribly.

While we hear reports of falling wholesale petrol prices around the UK, our petrol prices continue to rise to extreme levels.

We need immediate action now. Not dithering from the Scottish Government.

We need a rural fuel derogator that works best for the islands and not for the Scottish Government.

We have control of our own fuel taxation and rebate system but we aren't ensuring that our economy works to its greatest potential.

The Council and fuel prices

The fuel price derogation has had little or no comment from the Council.

Why could that be?  Given it is such a hugely important matter for the community.

Let's make it absolutely clear that there is absolutely no suggestion of impropriety or personal gain.  Absolutely not.  No way, Jose.  Let's put it down to incompetence and low ability thresholds.

If the Council buys a generic product from a number of suppliers, then having a preferred supplier could - must! - drive down prices as the various parties bid against each other.

Let's suggest that there are three suppliers of the same product that differs in price each week and by each supplier, meaning that the best deal may be difficult to locate by the customer.  What would you do to maximise value?

Would you: ask the three suppliers to tender and reduce that to two or even one suppliers based on a discount from the average price.

Would you: consider buying the product in bulk and renting storage and delivery at a fixed price, thereby reducing risk?

Or, would you: run a large and politically sensitive item of expenditure through an innocuously named report via a sub-committee; meaning that there was no proper discussion of the matter, as the majority of Councillors will have missed this.

I refer, M'Lord to Item 9 of the ICT, Procurement and Asset Management Committee; at this Committee the 'framework' agreement whereby the Council employees can buy the fuel wherever has the best bacon rolls.  My sources tell me that there is absolutely no prospect of their being a national contract occurring in the Western Isles, as there is no national supplier. 

Did this mean that the Leader and the Cllr N MacLeod did not have to declare an interest when the matter passed through the Policy and Resources Committee a few days later?

I'd love to tell you one way or another, but the Decision report - which was given to members that day, hasn't reached the web yet.

Does no-one - members or officers - have the sense to see how this must look to the public?  Blindingly obviously not; and that is a real worry.

A critical observer might believe that the backbenchers were being kept in the dark and told how and when to vote, whilst other have free reign to merge personal gain and Council business.  Harsh?  Yes, but that is the perception and this does nothing to remove that doubt.

Worse than that, how can the Council criticise the Governments when it so brazenly mismanages it's own fuel costs?

Fuel prices and a derogation

Is anyone really surprised that the planned 5p reduction in fuel duty comes with a huge admin burden attached?

This modest proposal - and it is very modest - is best with practical problems which will undermine it's effectiveness from day 1.


It should not be delivered by cutting 5p off the delivery cost onto the islands, when it leaves the tanker.  Regardless of all the proprieties, there is going to be a perception that the 5p is going into the Scottish Fuels profits, rather than to the public.  By dropping individual pump prices, there is an assumption that competition will keep prices low.

But how to bridge the cash flow issues?

Simple.  No honestly, it is simple.  Transport Scotland currently manages the Bus Service Operators Grant whereby duty is refunded to bus operators.  Expand that scheme to cover petrol stations, and as at present, make payments to account, before having a square-up at the end of the year when certified claims are submitted.

It's not ideal, because the 5p + VAT cut will be reduced by the costs for making and certifying claims (more work for accountants!) but it is probably the most efficient way to process the claims.

After all, as our MP says:

"...families and businesses continue to struggle with fuel costs."

So hopefully he has approached  the Scottish Government to ask them to match the cut by providing an equal subsidy to help the islands - I'm sure that someone can confirm this - as that would be the least we could expect if he isn't just making political points.

Policies the SNP have promised and CAN implement

I've been doing a bit of brainstorming to determine what we can now to be delivered by the SNP Government based on three criteria:

• It was as SNP promise or aspiration before the election
• It can be delivered under the current powers, and
• It is a sensible policy, rather than just grandstanding

After a bit of discussion, we selected what we think is probably the easiest and most attractive policy, and one that will gain widespread support.

I refer, of course, to petrol prices.

If you were to pile up all the press releases that have been issued on this matter by the SNP, you would undoubtedly need planning permission and a aircraft warning light on the top.

The solution is actually simple and most of the mechanism is already in place since it was devolved to Transport Scotland last year.  The process [and my suggestions].

1. Designate the areas to benefit from price reductions [all the islands]
2. Determine the price reduction for the coming year [50p/litre]
3. All petrol stations in the designated areas claim a rebate from Transport Scotland based on litres delivered  [quarterly, like Bus Service Operators Grant]

Er, that's it.  No consultation fee charged.

Some safeguards are necessary: any mainland red-lined areas would have to be carefully defined - using islands as a test area allows the problems to get ironed out; deliveries into drums would have to be limited to 50 litres; deliveries over 100 litres fully traceable; bus and marine fuel duty claims reduced accordingly.

What's stopping this happening; and I hope our MSP is busy lobbying for this, rather than just waiting to praise whatever list of promises is presented to the Parliament.

It isn't difficult, and isn't hugely expensive, so there can be no excuses for non-delivery by the Government.  Agreed?

Fuel duty changes

So the Government has delayed any fuel duty increases for next year and the year after.  He's using a strange mix of taxation on exploration and extraction to fund a 1p/litre reduction in fuel duty.

Great~ish in so far as it goes, but that really isn't going to make a huge difference to the ordinary motorist.

He has, however, plugged a huge hole in his budget with the tax grab, and got some very good headlines, but the detail needs a lot closer examination to see just what additional room for manoeuvre he may have had.

It's all a bit smoke and mirrors, but perhaps underlines the huge cost of cutting fuel duty.  The real driver for price change is the international price of oil; and until the middle-east stabilises (and how may times have we heard that?) prices are going to go up, and fuel at the pumps will cost more.

Fuel prices

According to a press release:

Mr MacNeil added his voice to the call for action on Wednesday, saying: “I have seen the books of some of the fuel retailers in the western isles and there is a big opaque hole around the distribution costs between refineries and pump prices." (My emphasis)

This isn't news, but the faux surprise in the tone is more about electioneering than about achieving anything.

We've heard repeated calls from MacNeil for investigations by the OFT into the petrol retailers, which he now acknowledges - after two OFT investigations - to have been targeted against the wrong parties.

But as Donald Crichton has asked, why has it taken this long for him to recognise the facts?

A fuel discount is coming.

Two cheers for Danny Alexander in promoting the pathetic offer of 5p of duty for all Scottish islands, and finally getting the business case to Europe.

Then he was undermined by Alan Duncan injecting a dose of realism that petrol might reach £2/litre (or in the worst case scenario £4/litre) if the Arab unrest continues.

If it currently costs me £60 to fill my car, it will cost me £58 after the discount.

By which time, if prices go the way we expect to £2/litre then even at the discounted price it will cost £85 to fill my car.

That puts it all in perspective.

Still, it makes the case for waiving all duty much easier, when you have that foot in the door.

No fuel duty would reduce the £60 to fill my car to £34.  All in favour of that option......

How the Faroese do it...

The ridiculous suggestion by our MP of "petrol tourism" to the Faroe Islands by hard-pressed locals, actually serves only to undermine the argument that he is trying to make.

The reason that petrol is so cheap in the Faroe Islands is very simple, and it is not that they control their own taxation affairs as he blurted out in the House of Commons.

The reasons are that the Faroe Islands are not part of the EU, and they receive a huge subsidy from the Danish Crown.

Part of that subsidy is that the islands are classed as a duty-free area (like the Canaries).  In the Western Isles, that would reduce prices to about 60p per litre compared to the errrr 94p in the Faroe Islands that Mr MacNeil praises.

I assume that Mr MacNeil is not meaning to argue that dependency status and a continuing and permanent subsidy from the Crown is the answer, but his logic does seem quite muddled.

He does, perhaps unwittingly, fully endorse my view that we should be arguing for a duty-free area in the islands as the way forward, as he highlights the impact of that status, compared to 5p from a duty regulator. 

Simpler, easier to implement and control, and has a massive impact. So why the reticence?

Fuel Duty Rebate

The proposal by Donald Crichton, Labour Candidate, to campaign for a £400 Fuel Duty Rebate for the Western Isles is intriguing, if ill thought through.

It's better than nothing, so let's welcome that; and let's see if he can formulate a sensible, workable, policy out of a press release.

My other car gets a subsidy too.

Because it's the loopholes that cause the problem.

Does my car have to be based full-time in the Western Isles?  If so, how does anyone check?

Is the rebate per car or per household?

Is the rebate limited to one car per person?

Does the car actually have to be driven, or will an MOT-failing ornament on the croft qualify?

And just how is this going to be administered?

Let's make it simple; reduce the duty at the pumps by making all the islands duty free zones.

Fuel discount discounted. Or not?

The coalition is all over the place with it's views on a fuel duty discount.  Cameron disapproves and Alexander approves.  Sort of.  For both.

Not surprisingly as what they are trying to achieve is fiscally complex and will be difficult to implemnt and police.

The easy option, which could establish the principle for rolling out elsewhere, is simply to create duty free zones, such as the islands.  Fuel deliveries of under £200 would be duty free.  Go above that and full duty would be payable.  Commercial operators could be approved - like subcontractors are - to receive larger deliveries tax-free, subject to the same inspection rules that currently apply to red diesel.

No smuggling problem, visitors and locals alike can benefit, and then work out how to roll this general philosophy out in a different way for the mainland.  How far from Inverness is remote?  Why (hypothetically) is there a discount in Garve but not Contin?

Why does our MP persist in trying to demand a system that cannot quickly be delivered, when quick and easy benefits for this constituency could be set-up in a fraction of the time; without compromising the general principle of what he seeks?

Petrol prices

So just what does the possible 5p per litre cut announced last month mean for the Western Isles?

Call me a cynic but, the following has been pointed out to me.....

	September	October
Fort William	116.9p	117.9p
Stornoway	127.9p	132.9p

h/t to my source

Brogan Fuels acquistion by GB Oils

The OFT have now framed their questions and issued an email or letter to many customers of Brogan, which make interesting reading.

The covering message read as follows:

The Office of Fair Trading (OFT) is currently considering the above acquisition under the merger control provisions of the Enterprise Act 2002. This will enable the OFT to form a view as to whether this merger should be referred to the Competition Commission.

As part of any investigation, the OFT seeks comments from competitors and customers of the merging parties. This is also your opportunity to raise with the OFT any concerns that you may have regarding the merger. I have attached the questions and would very much appreciate a response to my colleagues Dimitrios Sinaniotis and Alistair Love by 17:00 on 10 February 2010.

If you have any questions, please call Dimitrios on 020 7211 8911 or Alistair on 020 7211 8853.

The OFT recognises that respecting the confidentiality of commercially sensitive information provided to the OFT is vital to the effective performance of its merger review functions. The OFT will not therefore publicly disclose any information that you supply to us unless we are required by law to do so.

So if you are interested in commenting on this matter, then you have until Wednesday next week to make your feelings known. Not much time, but I am sure that many people have already worked out what they want to say.

Responses can be emailed to Duncan.Porter@oft.gsi.gov.uk