Monday’s negative slide is because the world has more crude oil than it can use or store. Storage facilities and even ocean tankers are filling up, with one reportedly stranded off the coast of Los Angeles as there is nowhere to store the oil when it docks. Fears of not finding a place to put oil in the next month means nobody wants crude oil, and this has led to a severe drop for West Texas Intermediate – a benchmark for US oil prices.
How much is a barrel of oil?
The worth of a barrel of US oil fell to less than nothing on Monday, the first time in history.
The value of West Texas Intermediate for delivery in June slumped to $6.50 at its worst, before recovering to settle at $11.57, down 43 percent.
Today it has risen to around $14 per barrel.
Will the price of petrol fall?
While the price of petrol is linked to the wholesale price of oil, it is driven by competition, not by the amount of oil there is in the world.
That means that what motorists pay is not directly linked to the price of crude oil.
Instead, suppliers control the prices they sell petrol at.
Crucially, a key factor affecting the price of fuel is that the biggest proportion of the money you hand over for a litre of petrol in the UK goes to the government in tax.
Fuel duty is charged at 57.95p per litre.
On top of that, you have to pay VAT at 20 percent on the cost of petrol.
Published at Wed, 22 Apr 2020 21:09:00 +0000