What’s in store for the fuel industry?

The electric vehicle market experienced a record year in sales in 2017, averaging over 4,000 new registrations per month in the UK — a significant increase compared to 2013 figures, which witnessed just 3,500 new registrations over the entire year! This has stemmed from the fact that diesel has received a lot of scrutiny lately for the levels of Nitrogen Oxide it emits from our vehicles, so much so that the UK government plan to ban the sales of new diesel and petrol vehicles by 2040 in a bid to clean up air quality across the nation.

The UK government are currently trying to encourage Brits to start their transition to electric and hybrid vehicles, but what does this mean for traditional fuel sources? Lookers plc, who provide a variety of car servicing plans, explore what the future of fuel looks like for the UK.

What effect will this have on traditional fuel prices?

Many external factors are currently influencing the economic state of fuel. This ranges from issues such as Brexit, UAE conflict, and harmful emissions. This has impacted fuel prices so much so that they haven’t been steady for some time now and a plan to eliminate petrol and diesel cars will not help steady the cost of fuel either.

The RAC and other industry experts have been encouraging supermarkets to cut their fuel prices to make them more affordable. This has resulted in three of the UK’s leading supermarkets have listened to the RAC’s call for lower fuel prices and have reduced fuel prices by up to 2p per litre as of February 2018.

A fuel spokesman for the RAC named Simon Williams stated that, “both petrol and diesel are now at their highest points for more than three years which is bound to be making a dent in household budgets”.

Fuel prices could continue to experience fluctuations throughout the process with Brexit still very much underway, and following Brexit, what will that mean for fuel prices? In 2014, the OPEC made a decision to increase the level of domestic fuel production in the UK, which led to a price drop to 98p in January 2016 — the lowest price of fuel per litre since the financial crisis in 2009. However, the UK still heavily relies on imported energy and fuel – around 38% of the UK’s total energy consumption is reliant on imported energy.

Could our trading relationships be at risk after Brexit? And, of course, we must also consider how the uncertainty around the value of the pound could affect fuel costs following Brexit.

The value of the pound experienced an immediate fall of 20% against the dollar after the UK voted to leave the European Union – causing fuel prices to increase by around 10p per litre and experts to raise concern that Brexit could mark the end of cheap fuel in Britain. The combination of higher crude oil prices and the devaluation of the pound mean Britain should expect higher fuel prices become the norm.

Electric Charging

In the past 12 months, our electric car charging infrastructure has evolved substantially to suit the lifestyles of many drivers. Following in the footsteps of other countries around the globe, like New Zealand who are rolling out easier-to-find charging stations, the UK has over 20 companies and organisations installing and running nationwide or regional electric car charging networks. This has happened as a result of the electric vehicle market has been the topic of criticism since they first launched models onto the automotive market, with a lack of charging points raising concern for many drivers, but could a transition towards electric and hybrid vehicles see us eventually wave goodbye to traditional fuel

Oil firms are also recognising the potential for growth into the battery-powered vehicle market. A decision that follows in the footsteps of their rival, Shell, who have already invested money in several electric car infrastructure companies to install charging points at their service stations. According to The Guardian, the British oil firm, BP, is also investing $5 million (£3.5 million) in the US firm Freewire Technologies, which will provide motorbike-sized charging units at forecourts to top up cars in half an hour.

The chief executive of BP Downstream, Tufan Erginbilgic, commented: “EV charging will undoubtedly become an important part of our business, but customer demand and the technologies available are still evolving.”

InstaVolt are also installing at least another 3,000 rapid charging points across fuel station forecourts across the UK. Some researchers have also claimed they could have developed an ‘instantly rechargeable’ method that recharges an electric battery in the same time as it would take to fill a gas tank – a solution to one of the biggest headaches of electric vehicles. EV charger installation pods have also been appearing across the UK.

In November 2017, global figures hit three million for the number of electric vehicles collectively on the roads – with China proving to dominate the market. Whilst oil firms such as BP expect the electric market to continue to rise, they hope the oil demand is not seriously affected – by cutting themselves a slice of the electric vehicle charging cake though, firms are covering their back if traditional oil demand does take a dip in line with the government’s plans to reduce harmful emissions and cut back on crude oil prices.

The cost of fuel looks to remain uncertain in the near future, though thing that appears to be for certain is that both the high fuel prices and attempts to improve air quality in the UK will have a positive impact on the EV market, with success forecast to continue to surge in the years leading up to 2040.