Question
Could you please let me know the formula to convert the price of oil per barrel to the price per litre paid on a UK forecourt?Answer
I don't have a precise formula as such, but would calculate the link between the oil price and petrol prices as follows.
The price of fuel comprises the amount charged by the oil company to the petrol retailer, the retailer's margin, excise duty and VAT on the total of these three items.
Fuel excise duty is currently fixed at 58.95p per litre of unleaded petrol or diesel, VAT is charged at 20% and petrol station margins are generally around 5p per litre.
Armed with these figures, if the price per litre of fuel is 130p then VAT would account for 21.67p of the sale price (130p - (130p / 1.2)). We know the other costs are 58.95p of duty and 5p (assumed) retailer margin, meaning the oil company is probably charging the retailer 44.38p per litre (130p - 21.67p - 5p - 58.95p).
Now, if the relationship between the oil price and the price fuel is sold to retailers were constant we could calculate a simple ratio between the two from our above example.
A barrel of oil contains 159 litres (42 US gallons) and, after refining, produces around 75 litres of petrol. So if a $95 barrel of oil produces 75 litres sold by the oil company at 44.38p the ratio would be 1 litre of fuel is sold (in pence) at 0.47% of the cost of a barrel.
But unfortunately it's not that simple. Oil companies will have some costs that are relatively fixed (e.g. the costs of refining oil to make fuel and distribution) and might also vary their margins over time, so it's not a perfect linear relationship. Plus oil is priced in dollars whereas we pay for fuel in pounds, so exchange rates will also need to be taken into account.
Sorry I can't answer your question exactly, but hopefully the above will point you in the right direction.
Could you please let me know the formula to convert the price of oil per barrel to the price per litre paid on a UK forecourt?Answer
I don't have a precise formula as such, but would calculate the link between the oil price and petrol prices as follows.
The price of fuel comprises the amount charged by the oil company to the petrol retailer, the retailer's margin, excise duty and VAT on the total of these three items.
Fuel excise duty is currently fixed at 58.95p per litre of unleaded petrol or diesel, VAT is charged at 20% and petrol station margins are generally around 5p per litre.
Armed with these figures, if the price per litre of fuel is 130p then VAT would account for 21.67p of the sale price (130p - (130p / 1.2)). We know the other costs are 58.95p of duty and 5p (assumed) retailer margin, meaning the oil company is probably charging the retailer 44.38p per litre (130p - 21.67p - 5p - 58.95p).
Now, if the relationship between the oil price and the price fuel is sold to retailers were constant we could calculate a simple ratio between the two from our above example.
A barrel of oil contains 159 litres (42 US gallons) and, after refining, produces around 75 litres of petrol. So if a $95 barrel of oil produces 75 litres sold by the oil company at 44.38p the ratio would be 1 litre of fuel is sold (in pence) at 0.47% of the cost of a barrel.
But unfortunately it's not that simple. Oil companies will have some costs that are relatively fixed (e.g. the costs of refining oil to make fuel and distribution) and might also vary their margins over time, so it's not a perfect linear relationship. Plus oil is priced in dollars whereas we pay for fuel in pounds, so exchange rates will also need to be taken into account.
Sorry I can't answer your question exactly, but hopefully the above will point you in the right direction.
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