The news that both Shell and BP were raided earlier this week in a price fixing probe has been greeted with hysterical headlines about the cost to consumers. The Daily Mirror screaming “They’re bleeding us dry” probably being the best example from yesterday’s front pages.
However, the ‘price at the pump’ is something of a distraction in this case. Yes, motorists have had their pockets picked, but I doubt that price fixing has had a dramatic impact on consumer behaviour.
Ten years ago I was doing 30,000 miles a year at 80p a litre, but my behaviour has not changed now that the price has risen to £1.40 a litre. I’m still doing the same sort of mileage.
All of this could lead the oil companies to argue, if any case comes to court, that this is a victimless crime. They’d be wrong.
The real issue here is potentially the impact on business. Let’s take the road haulage industry for example. Typically, the industry operates on very slim margins, in fact I remember one former client of mine existing on an operating margin of circa 2-2.5%.
That leaves no room for error let alone coping with the potential effects of price fixing. What’s more, all too often at least a portion of any increase in fuel prices cannot be passed onto customers – it just has to be absorbed.
And that’s just one example. What about courier companies, service industries with large car fleets and even your average white van man. The damage to business if this is proven is incalculable.
Of course this absorbing of cost increases by business has a knock on effect on wages and investment. I’ve seen figures this week which suggest that new product development is at historic lows in the UK. Real incomes for employees have not risen in ten years.
I was genuinely shocked at the rigging of LIBOR in London, the benchmark interest rate from which all other interest rates, globally, are taken. I don’t know whether I’m just becoming punch drunk from all of this but the news of the oil price fixing didn’t hit me in the same way.
The truth of the matter is, the pendulum has to be swung back towards greater regulation which might help “real businesses that actually make stuff” as one former Chief Executive client of mine told me a while ago.
The best way to start is for the Serious Fraud Office to prosecute some people.