September 26, 2023


Business&Finance Specialists

Strike Threat Blights U.K. Fuel Supply Optimism: Energy Update

11 min read

(Bloomberg) —

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The U.K. suffered fuel shortages as the government struggled to respond to panic buying, and a strike vote this week at a key distributor threatened to dampen optimism that the crisis would end soon.

The government has already caved in to industry demands to issue 5,000 short-term visas to truck drivers, yet business leaders and unions said it wouldn’t be enough. Fuel supplies have run dry at numerous sites around the country, threatening the ability of key workers to do their jobs.

The risk is that a prolonged fuel crisis will damage the post-pandemic recovery, putting more strain on already stretched supply lines.

Key Developments:

  • Suppliers expect demand to ease in coming days

  • The trucking company that works for BP Plc could face strike action

  • Some U.K. refueling stations are limiting purchases to about 30 pounds ($41)

  • Government suspends competition rules in the sector so that companies can share information

  • Some members of Petrol Retailers Association are reporting 90% of sites have run dry. BP says it has run out of fuel at a third of its stations

  • Brexit is to blame for the crisis, says Olaf Scholz

  • Ministers to meet on Monday

Timestamps are London

Possible Strike at BP Supplier (6:54 p.m.)

Some drivers at Hoyer, a U.K. company that handles fuels deliveries for BP, will vote this week on strike action. The vote over pay currently affects about 10 workers at the fuels distributor, according to a spokesman for the Unite union, which represents the affected drivers. The result will be out on Friday.

According to Hoyer, some drivers decided not to accept an offer in July to increase their remuneration package by more than 20%. The company is now offering those terms to new drivers, and the offer remains open to existing employees, it said in a statement dated Sept. 25.

U.K. Energy Crisis May Curb BOE Monetary Tightening (5:10 p.m.)

The U.K.’s gasoline supply shortage coupled with surging power prices could dent confidence enough to hold back the Bank of England’s ability to tighten monetary policy, according to Nomura.

Analysts at Nomura say increased fuel prices in the wake of panic buying could push inflation higher and hurt the U.K.’s economic recovery as consumers face rising costs.

“We remain concerned about the risk that higher energy prices often lead to lower confidence, particularly at a time when rising virus case numbers could yet scupper the nascent economic recovery as we head into the winter period,” Nomura analysts wrote in a note on Monday.

Suppliers See Fuel Demand Easing In Coming Days (4:45 p.m)

A group of companies including BP, Shell U.K., and Esso say they expect demand to ease in the coming days and there’s no shortage of fuel at refineries and terminals.

“As many cars are now holding more fuel than usual, we expect that demand will return to its normal levels in the coming days, easing pressures on fuel station forecourts,” the companies said in a statement.

The group, which also includes fuel transport companies, says it’s “working closely” with the government to help ensure supply is available.

‘Calm Down,’ Says Fuel Deliverer Hoyer (3:15 p.m.)

One of the U.K.’s major fuel transporters is telling motorists to take a breather.

“As long as people continue to buy or store fuel that they don’t need then it will be difficult to replenish sites,” said Allan Davison, managing director for Hoyer Petrolog U.K. “We once again urge people to calm down, fuel up when they need to and the situation will then be able to recover.”

The company is “100% focused on our delivery operations and deliveries are getting through nationwide,” he added. UNISON Calls for U.K. to Use Emergency Powers (2:40 p.m.)

UNISON, one of the U.K.’s largest unions, is calling on Johnson’s government to invoke emergency powers to resolve the fuel crisis. Here’s a tweet from its volunteer and community sector, which represents workers at charities and non-profits.

Fuel Retailers Quiet on Resupply (1:25 p.m)

With a crisis in U.K. retail fuel supply now in its fourth day, companies that sell gasoline and diesel are struggling to provide clear timelines on when the situation will normalize. Have a look at this tracker on the latest statements from providers.

Health Workers Need Priority for Fuel: Doctors’ Group (1:13 p.m.)

As pumps run dry “there is a real risk that NHS staff won’t be able to do their jobs,” Chaand Nagpaul, council chair of the British Medical Association, said in a statement.

“While the government has said it is putting plans in place to alleviate the shortage of HGV drivers to transport fuel, the results of this won’t be immediate,” he added. “Healthcare and essential workers must therefore be given priority access to fuel so they can continue their crucial work and guarantee care to patients.”

Government in Wait-and-See Mode Before Calling in Army (12:25 p.m.)

The U.K. government is ready to bring in the army to help ease the crisis, but it’s waiting to see if a suspension of competition rules — allowing companies to coordinate fuel supplies to the most affected regions — will have any effect first, according to a person familiar with the matter.

As no formal data is yet showing an improvement, the government is preparing for any additional measures that are needed, and it would bring in military drivers in a worst-case scenario, the person said. The current expectation is that they won’t be needed.

Ministers will meet to discuss the supply chain issue again later Monday.

Labour Slams ‘Supply Chain Chaos’ (12:15 p.m.)

The main opposition Labour Party’s finance spokeswoman, Rachel Reeves, slammed the “supply chain chaos” presided over by Johnson’s Conservatives, blaming it on a failure to prepare for Brexit.

Speaking to a packed hall at the party’s annual conference in Brighton, she received resounding applause, proclaiming “the Tories have lost control.”

Meat Production Could Stall If Fuel Shortage Worsens: Association (12:04 p.m.)

U.K. abattoirs rely on critical workers from meat inspectors to veterinarians to keep plants operating, many of whom often work at multiple factories across long distances. If they can’t get fuel to travel to work sites, production could quickly slow, according to the British Meat Processors Association.

“We have heard reports from a couple of companies already that they’re missing some of these key workers,” a BMPA spokesperson said by email. “So far it has not caused any plants to completely shut, but we are monitoring the unfolding situation very carefully.”

Motoring Group Sees More Drivers Stranded (11:38 a.m.)

There was an increase in the number of roadside assistance drivers helping people who ran out of fuel over the weekend, according to Simon Williams, a spokesman for automotive services group RAC. He didn’t specify how large the uptick was.

The group also expects to see fuel demand ease in the coming days “as so many drivers filled up over the weekend,” Williams said. He said drivers should only take the fuel they need, as stock-piling fuel in containers is only making the situation worse, while also being dangerous.

Fuel Shortages Seen Continuing Until End of Week (11:37 a.m.)

The spate of panic buying that emptied fuel stations over the weekend may last for several more days, but should burn out by the end of the week.

“It could take several days or a week or so to catch up and replenish all the stations,” said Tim Doggett, chief executive of the Chemical Business Association, whose members include companies that work in fuel production and distribution. “The forecourts have just been overwhelmed by demand.”

Even after the immediate crisis dies down, the U.K. will still have a major problem with truck drivers. As much as 20% of vehicles in some companies involved in fuel distribution are inactive due to the driver shortage and other issues, while the government’s 5,000-visa policy won’t be enough to fix the problem, Doggett said. Pressure on the fuel supply chain is also likely to increase in run-up to the peak Christmas season, he said.

“It’s just too little, too late,” Doggett said. “We’ve been calling for more action since May.”

Business Group Demands Quick Solution to Fuel Crisis (11:33 a.m.)

The Confederation of British Industry, the U.K.’s biggest business lobby group, said the government needs to find quick solutions to the problem. While the prime minister is right to push for “a much more resilient, high-skilled, high-paid” economy in the longer run, in the short term he needs to focus on increasing the number of truck drivers and getting the economy moving, CBI Director-General Tony Danker told Times Radio.

“If you’re sitting at your lunch and the light bulb goes out, you can fold your arms and say we need new wiring, but actually you need a new light bulb, right?” Danker said.

Uber Waiting Times Grow as Drivers Search for Fuel (11:10 a.m.)

Uber Technologies Inc. had already seen its U.K. waiting times increase as drivers departed to other ride-hailing apps. Now they are spending more time searching for fuel, hindering their ability to meet demand for fares, according to James Farrar, general secretary of Britain’s App Drivers and Couriers’ Union.

Drivers aren’t compensated for this time and can’t raise prices themselves, so the fuel crisis is eating into their earnings, Farrar said. An Uber spokesman said the company is not seeing a direct impact yet due to the fuel shortages but is monitoring the situation closely.

Airports Aren’t Affected by Crisis in Road Fuels (10:41 a.m.)

Air travel has been spared from any disruption because jet fuel is mostly pumped directly to large onsite storage facilities at airports. London Heathrow, the U.K.’s largest airport, has “an independent network primarily supplied by pipeline,” spokesman Weston Macklem said. London Luton has likewise seen no impact, said spokesman Neil Bradford.

Fuel Stations Remain Shut Around London Due to Lack of Supply (10:24 a.m.)

At all points of the compass around London, numerous fuel stations had no supplies for motorists.

From Balsam Hill in the south to the Holloway Road in the north, some sites operated by Royal Dutch Shell Plc had covered their pumps and put out signs saying fuel was unavailable. Still, cars and vans continued to drive through the site seeking supplies. One BP Plc site in Shepherds Bush, in the west of the city, had cordoned off all of its pumps with red and white tape.

One of the few stations in London that had any fuel for sale early on Monday morning caused a small traffic jam on the Albert Embankment, across the Thames from the Houses of Parliament, as trucks and taxis lined up to fill their tanks.

Tesco Plc, the supermarket chain that has more than 500 of its own fuel stations around the U.K. and a further 200 which are operated by Esso with a Tesco Express store on site, said it is not rationing fuel.

While the retailer has experienced some temporary outages of fuel in a number of areas, it had “good availability of fuel,” according to a statement on Monday.

London Taxi Drivers Seek Special Status as They Struggle to Find Fuel (9:29 a.m.)

The London Taxi Drivers’ Association said on Twitter that it has been urging City Hall to lobby the government to designate some fuel stations for the use of essential workers only.

One black-cab driver told Bloomberg how she tried 10 north London gas stations on Saturday night, queuing for two hours at one site before the police came to clear away motorists when it ran out of fuel. She eventually found a BP garage open at 6am on Sunday morning.

“I ended up searching from 11 p.m. to 6 a.m., because I wouldn’t have been able to work the next day if I didn’t,” said Miss Bell, waiting for customers at a north London taxi rank on Monday. She declined to give her first name.

Union Says Government Bid to Attract More Truck Drivers Will Fail (9:03 a.m.)

Poor working conditions mean the U.K.’s bid to attract truck drivers on short-term visas will be a “dead end,” said Edwin Atema, head of research and enforcement at the FNV union, which represents drivers across Europe.

“The EU workers we speak to will not go to the U.K. to help the U.K. out,” Atema told BBC Radio 4 on Monday.

Across Europe, drivers who are “plagued by exploitation” have been leaving the industry as multinational companies drive down costs, Atema said. But the situation is particularly acute in the U.K. because there is no collective agreement for the whole road transport industry, he said.

London Mayor Says Emergency Services Have Fuel, Key Workers Struggling (8:56 a.m.)

London Mayor Sadiq Khan said his office is working with the Department of Transport to try to find ways of securing fuel supplies for key workers.

“Our emergency services and our buses have enough and they’ve got some in reserve,” Khan said in an interview with Sky News. “We’re hearing stories about care workers, people who work in hospitals who need their car to go to hospital, black cab drivers, private-hire vehicle drivers not being able to fuel up.”

In a separate interview with Times radio, Khan said “we’ve got to get the army in as soon as possible,” to help deliver fuel supplies.

Labour Party Accuses Government of Worsening Panic (8:25 a.m.)

The opposition Labour Party blamed the government for the current situation, saying it was complacent before the fuel crisis occurred and has stoked panic through poor communications.

“The government is tweeting out in capital letters: ‘There is no fuel crisis’,” Labour treasury spokeswoman Rachel Reeves told Times Radio on Monday. “I don’t know anything that’s more likely to induce panic.”

Action taken by the government to resolve the shortage of truck drivers falls short of what is needed, Reeves said.

Some Fuel Retailers Say 90% of Sites Are Dry: PRA (7:10 a.m.)

The Petrol Retailers Association, representing service stations in the U.K., said some of its members in England have all but run out of fuel.

“It looks as though the panic-buying has really been exacerbated in the main urban centers, particularly in England,” Brian Madderson, chairman of the PRA, said on Sky News. Some larger retailers report 50% of sites are dry; “some even report as many as 90% dry yesterday.”

While the issue is “quite acute,” Madderson said “I am keeping my fingers crossed it will be less of a problem by the end of the week.”

Kwarteng Enacts Emergency Protocol (Sunday)

Business Secretary Kwasi Kwarteng triggered the “Downstream Oil Protocol” to exempt the industry from competition rules temporarily.

The move allows companies to share information so they can prioritize deliveries to where they are needed most. And it makes it easier for the government to work with producers, suppliers, hauliers and retailers.

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