Europe diesel pump prices rise amid wholesale hike

www.forbes.com Reuters, 03.07.03, 9:07 AM ET By Neil Chatterjee LONDON, March 7 (Reuters) - Diesel pump prices have started to go up in Europe with further hikes expected after the wholesale market traded at post-Gulf War highs this week, industry experts said on Friday. This means larger fuel bills for both motorists and hauliers, who are already suffering from higher costs as prices have been boosted in the past few months by fears of war in the oil-rich Middle East. "There's a genuine shortage and I think motorists are definitely going to be paying more starting from next week," said Ray Holloway of the UK Petrol Retailers Association. In Germany, Europe's largest consumer of motor fuels, oil major Shell <SHEL.L><RD.AS> lifted its diesel pump price by three euro cents on Thursday, to a minimum of 94.9 euro cents ($1.05) a litre, as a direct result of this week's wholesale jump. Dieter Gripp of the Hamburg-based European Oil Telegram said that although German retail competition and the strength of the euro currency could limit pump price hikes, businesses buying diesel wholesale would be hit by the extra costs. On Friday oil major TotalFinaElf <TOTF.PA> bought a standard diesel cargo at an all-time record premium of $105 a tonne over April IPE gas oil futures, giving a full price of $412 a tonne -- a jump of 54 percent from the start of the year. Total traders say they need to pay up at massive premiums in the face of European shortages of the motor fuel and of tankers to carry it.

STOCKING UP Meanwhile some dealers say refiners in Spain, Germany and Italy have been told to build up their compulsory diesel stocks ahead of a possible U.S.-led war with Iraq, the world's eighth biggest oil exporter. French diesel prices have not seen any fresh hikes linked to the latest price surge but have already gone up six euro cents this year to 88 euro cents a litre as underlying futures prices have surged on war speculation. War fears and a three-month old strike in Venezuela, the world's fifth biggest exporter, have also pushed European gasoline prices up since the start of the year, with further rises likely. In the UK, diesel prices have risen this year to an average of 79.5 pence ($1.28) a litre, with this week's wholesale surge and poor retailer margins meaning experts expect a hike of two pence a litre next week. "We're in a pincer movement, because of shortages in the Middle East and in the U.S.," said Holloway. He said military demand was soaking up supply from the Middle East, while in the U.S. inventories had dropped following the Venezuelan strike, a major programme of U.S. refinery maintenance and strong heating oil demand amid a cold spell. U.S. industry data this week showed a 3.5 million barrel drop in gas oil stocks last week, which includes heating oil, diesel and jet fuel, leaving them 34.6 million barrels or 26 percent below this time last year. The U.S. Energy Information Administration said on Thursday that commercial oil stocks were likely to remain near the lower end of a 5-year average through 2003.