New deal for fuel retailers
A decision by Scottish Fuels to allow Western Isles garages to buy petrol and diesel from other suppliers is being extended to retailers here.
The Shetland Times has learned some retailers have already been freed from their obligations to the large oil company. But there are doubts as to whether the decision will pave the way for more competition in the isles.
Scottish Fuels announced on Tuesday it was giving petrol stations in Lewis the chance to walk away from their contracts and look elsewhere for their fuel.
The cave-in came after some filling stations there threatened to break their deals following boycotts by disgruntled motorists fed up with high prices.
A statement from the supplier said it had written to Hebridean retailers offering the opportunity to end their retail supply contract and move to “spot” buying on the open market.
The company confirmed it planned to make the same offer to “four retailers with contracts in the Shetland Islands.” But it insisted pump prices on the forecourts were “solely the responsibility of [the] retailer”.
“Contracts with retailers are very common throughout Britain and Europe, and are used by all fuel suppliers,” the statement said. “However, due to adverse publicity these contracts have attracted in the Western Isles, Scottish Fuels felt it appropriate to give the retailers … the option to re-assess their requirements”.
The company insists the move is not a reaction to any possible further investigation by the Office of Fair Trading (OFT), which has been probing pump prices.
“Scottish Fuels welcomes any future investigation as the company has acted in a fair and reasonable manner over the years, as confirmed by the last two OFT reports.”
Retailers here poured cold water on the announcement, and pointed to the sole storage depot for fuel here being owned by Scottish Fuels. That, they warned, could cause difficulty for any potential new supplier looking to match the fuel giant’s costs.
Owner of Tagon Stores in Voe, Scott Preston, said Shetland Islands Council needed to pay more attention to continuing high prices at the pumps. Earlier this year Mr Preston, and his wife Phoebe, slashed their prices by 20p a litre for one day to draw attention to the debate.
Mr Preston said: “I would be interested to hear what our council are saying. Are they supportive of trying to find cheaper solutions? What are they doing?
“The biggest issue for me is this: how could a family of four travel to Lerwick twice a week to buy their weekly groceries at Tesco’s and come back again and support their local businesses? How are people supposed to do that when fuel is so expensive?
“Whether we like it or not, the council have to be a part of that. They have to find a way to engage with the business. I really hope that this does make a huge difference, but I won’t hold my breath.”
He added the focus should now turn to dissuading the Treasury from its plans to introduce a three pence a litre rise in duty from January.
However, chairman of the council’s transport body Zet-Trans, Allan Wishart, warned the nature of the local fuel market left insufficient demand for a second fuel depot.
“People who have spoken about this have said the council should provide storage, but the council is not a fuel retailer or distributor,” Mr Wishart said.
“It’s up to the retailers and wholesalers to discuss their contract terms, and obviously that could be seen as beneficial so long as retailers and wholesalers are content with the outcome of that. “Retailers will be very careful, given there is only one depot. But if it can lead to cheaper fuel, I think everybody would applaud that.”
Isles MSP Tavish Scott said some local businesses had already been freed from their contractual obligations. He was more optimistic that other fuel suppliers could be attracted to the isles.
Mr Scott said: “I would welcome any step that reduces the cost of fuel in the isles. If the ending of this is that local garages can buy cheaper fuel and pass on the savings to Shetlanders that has got to be a step forward.”
However, head of the local branch of the Federation of Small Businesses, Ian Brown, said questions still needed to be asked over the continuing gap between Shetland and mainland prices, despite the introduction of the 5p derogation scheme by the coalition government.
“The price difference between the mainland and Shetland seems to be still 15p, 20p, or 25p. The 5p reduction was meant to bring us closer to the mainland price,” Mr Brown said.
“Somebody is pocketing the 5p and I’d like to know who. We’re being told it’s because of the extra cost of shipping to Shetland. But it can’t cost that much to ship fuel to Shetland.”
The news comes as the OFT prepares to publish findings from its recent investigation into pump prices in January. One element of its investigation surrounds what it calls “rocket and feather” pricing, when the pump prices “rocket” up as the price of oil increases, but drops like a “feather” when it comes down again.