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CBI asks whose interests is Ulster Consumer Council promoting?
30th November 2008
The Confederation of British Industry (CBI) in Northern Ireland has responded to a recent press release by the Consumer Council in Northern Ireland, by questioning whether the council is promoting the interests of consumers, or instead simply promoting itself.
The full text of the briefing note issued by the CBI can be read below, and is copied below with their agreement:
Is the Consumer Council promoting itself or the interests of consumers?
On 7 November the Consumer Council issued a Press Release titled 'Answers needed or home heating oil industry could be referred for investigation'
This is a quite threatening heading. Business expects such a statement to be backed up by accurate evidence and facts - yet in this case the Consumer Council has provided highly misleading comparisons, which provides an inaccurate assessment of the home heating oil market.
The first lines of the press release state 'The last time crude oil was at this week's price ($58.41/barrel on 5 November), consumers paid on average £275 to fill a 900 litre tank' (this refers to February 2007). Today they are paying £416.' The press release goes on to question whether the home heating oil market is working.
FACT - the Consumer Council totally ignored the significant depreciation in sterling since August 2008 - in February 2007 a barrel of oil cost £29.44 while on 5 November 2008 a barrel of oil cost £36.94 - a 25% variation. This is ignored in the Consumer Council comparisons.
FACT - the last time crude oil was at the level of 5 November in sterling terms was at the end of October 2007 (and not in February 2007). Prices for 900 litres of home heating oil in October 2007 were £328 rising to £377 in November 2007 (a fairer comparison) with the £416 average quoted by the Consumer Council for November 2008.
FACT - consumers use home heating oil, or kerosene, and not crude oil. This is a traded product on the Rotterdam market - the price in the first week in November 2008 was approximately £440 per tonne, compared with approximately £300/tonne in February 2007. The last time kerosene prices were at this level was earlier this year (in February 2008) when 900 litres cost £385 - about 8% below the average quoted by the Consumer Council for November 2008.
None of these comparisons include additional costs of processing, transport or labour in the intervening period. The CBI expects better from the Consumer Council rather than a sensational press release with misleading information.
This is not the first time that Consumer Council has sought to seek publicity first and ask questions later.
On 10 October 2008 the Consumer Council issued a press release titled 'Is The Price Of Our Diesel a Rip-off?'
The first line of the press release stated 'The Consumer Council is demanding an explanation why consumers are paying so much more for diesel than petrol here. This time last year the average price of a litre of petrol and diesel was almost neck and neck, and now there is a massive 13 pence difference between the two. Consumers need to know why'.
The CBI understands that the Consumer Council undertakes research. It is therefore highly disappointing that a respected body should be asking whether the price of diesel is a rip-off without having done some basic research first.
A 15 minute search on Google will reveal the following:
- There has been increasing demand for diesel in the UK for some years now (and further afield) with around 45% of new cars registered in 2008 using diesel compared with less than 15% in 1999 - the price differential between petrol and diesel started several years ago
- The UK is now a net importer of diesel, while the EU has deficit of close to 30 million tonnes per annum
- Wholesale prices of diesel and petrol are quoted (and traded) on various exchanges - during the summer the gap between diesel and petrol increased to around £75/tonne, equivalent to around 10p/litre and with VAT added at 17.5% this alone explains a price differential of around 12p/litre
- Competition in the UK has kept pre-tax prices amongst the lowest in the EU - note that the AA indicate that in October 2008 government taxes make up 63.2% of petrol prices and 58.5% of diesel prices.
Of course the real irony in all of this, is just as UK motorists enjoy amongst the lowest diesel prices in the EU before VAT, so home heating oil customers in Northern Ireland enjoy amongst the lowest prices in the UK. Perhaps next time, before the Consumer Council releases a sensationalist storey, it will follow the CBI's advice and spend 15 minutes searching on Google?