I was watching the BBC News this evening, and there was a report about the effect of a no deal Brexit on the fuel refining industry.
The person interviewed said that - presumably because WTO terms would apply - there would be a 5% import tariff applied to refined fuel exports from the UK into the EU, in which case the business might cease to be viable.
However, there appears to be a general consensus amongst experts that a no deal Brexit would cause sterling to fall sharply.
So assuming that the fall was by at least 5% (anything less than that would be within normal fluctuations) that would seem to wipe out the disadvantage of the 5% tariff, thereby meaning that fuel exports to the EU would not be affected. Indeed, if the fall were to be more than 5% it would seem to confer a positive advantage on the exporters.
Of course I realise that a weakened sterling would also cause the price of imported crude oil to increase, but there must be a lot of added value between a litre of crude oil and a litre of petrol, so that it would not be anything like a direct correlation.
I suspect it's not as simple as this, but I'd be interested to hear any views.
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Fuel exports and tariffs
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- Lemon Quarter
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Re: Fuel exports and tariffs
https://www.bloomberg.com/news/articles ... eak-demand
Looks like the average margins are USD5-6 per barrel. With a crude oil price of USD 60 the tariff would be USD 3 which is on average more than half the margin.
Margins appear to be particularly low at the moment and the tariff would be higher than the margins in the article I linked to.
Looks like the average margins are USD5-6 per barrel. With a crude oil price of USD 60 the tariff would be USD 3 which is on average more than half the margin.
Margins appear to be particularly low at the moment and the tariff would be higher than the margins in the article I linked to.
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- Lemon Quarter
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Re: Fuel exports and tariffs
Clitheroekid wrote:I was watching the BBC News this evening, and there was a report about the effect of a no deal Brexit on the fuel refining industry.
The person interviewed said that - presumably because WTO terms would apply - there would be a 5% import tariff applied to refined fuel exports from the UK into the EU, in which case the business might cease to be viable.
However, there appears to be a general consensus amongst experts that a no deal Brexit would cause sterling to fall sharply.
So assuming that the fall was by at least 5% (anything less than that would be within normal fluctuations) that would seem to wipe out the disadvantage of the 5% tariff, thereby meaning that fuel exports to the EU would not be affected. Indeed, if the fall were to be more than 5% it would seem to confer a positive advantage on the exporters.
Of course I realise that a weakened sterling would also cause the price of imported crude oil to increase, but there must be a lot of added value between a litre of crude oil and a litre of petrol, so that it would not be anything like a direct correlation.
I suspect it's not as simple as this, but I'd be interested to hear any views.
Nothing to do with WTO terms, the EU, including us, applies a 5% tariff on all petrol imports.
Boris is on record as saying that there would be no import tariffs for stuff coming into the UK. Under WTO rules the no tariff would not only apply to imports from the EU but also from other sources, like Russia. Remembering that most of the price of petrol is taxes, there is not a huge added value between crude and petrol and giving imported goods a 5% advantage does sound like like a death knell for the UK refineries.
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Re: Fuel exports and tariffs
johnhemming wrote:Margins appear to be particularly low at the moment
Margins have been low for a while because there is overcapacity in the refining business - and they are risky for corporate reputations as they have a habit of going 'BANG'.
As a result a number of big name oil companies got out of their UK refining business a few years ago; BP sold Grangemouth to Ineos and Coryton to Petroplus (before they went bust and the Coryton refinery was closed for good), Shell sold Stanlow to Essar, and Murco sold Pembroke to Valero.
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