Petrol Prices Drop To A Three-Year Low

Petrol: The Pump Price Conundrum

Updated: 10:35pm UK, Wednesday 30 January 2013

By Ursula Errington, Business Correspondent

So, the OFT says motorists aren't being ripped off, that the price of petrol on our forecourts is fair and isn't the result of collusion or price-fixing.

Outraged motoring groups still aren't convinced.

The reality is, I don't think anyone knows how to work out the relationship between crude oil and pump price.

From the moment crude oil is pumped out of the ground to when we hand over our money at the till to pay for a topped-up tank, the price of the commodity has been influenced by multiple markets all subject to their own supply and demand idiosyncrasies.

I last worked in oil trading about a decade ago and back then the relationship between the price of Brent crude oil and pump prices was deemed to be pretty sketchy.

Assiduous analysts, whose job it was to structure financial instruments to hedge the bank's customers with exposure to fluctuations in the oil market, pored over oil prices and pump price data looking for a concrete correlation on which to base a safe hedging instrument.

Judging by the collective sighing, teeth-gnashing and head-in-hand gestures, it proved both time consuming and difficult.

Broadly a six-week time lag was identified between a movement in the crude oil price to a correlating adjustment in the pump prices back then but it was considered too statistically patchy to appeal to clients.

So why is it so difficult to find a relationship between the price of oil and the pump price drivers pay?

Firstly, pricing crude oil itself is pretty complicated. Before the black stuff is even out of the ground its anticipated value has been traded on the futures market for weeks, months or years before.

On any one day the oil price is set by taking a combination of a weighted average and straight average up to two months in the future, of all the trades over 600,000 barrels executed on the electronic trading platform the Intercontinental Exchange (ICE).

So it is fair to say that part of the oil price is set by traders who are speculating, who have no intention of allowing their futures contracts to mature and "go physical" (i.e. become related to an actual cargo of oil) but who are buying and selling futures contracts depending on their day-to-day view of the multiplicity of variables effecting the market.

This need not be considered a bad thing. Speculative traders aren't just plucking figures out of the air, they are working on the basis of fine-tuned mathematical models used to assist them in weighting all the factors in play - an outlandish speculative trade based on few decent indicators wouldn't be in their interest at all.

Crucially, these traders add a huge volume of trades to the market, which actually means that big distortions in one trader's view are evened out across the average when the price is set. 

Then there is the shipping market to get the stuff to shore. Highly volatile and as prone to geo-political influences as the commodity itself, shipping deals are opaque because they are over-the-counter and are often based on long-term trading relationships.

The economics of refining are also unhelpfully complex, predominantly because optimising refinery operations is tricky.

Refinery margins (the difference in price between the wholesale value of the products coming out of the refinery and the crude oil from which they were derived) have been surging for many companies of late because of a relative drop in the cost of crude oil and solid demand for products but unscheduled refinery outages, workers on strike, storage costs, changes in the quality of the crude itself - all these things will impact the margin within hours.

And then there's the cost of haulage and the variables at petrol station level, such as a franchise owner's credit rating, local forecourt wars and location.

All of that and we still have some of the cheapest fuel in Europe, according to the OFT.

But it's not over yet - the taxman must also have his share. In the 10 years from 2003 to 2012, prices at the pump increased from 76p per litre (ppl) to 136ppl for petrol and from 78ppl to 142ppl for diesel. Nearly 24ppl of that increase was because of tax and duty.

Is it any wonder then that trying to compare the price of crude oil and the pump price proves a largely fruitless task?

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Phones4u Owner Nears £300m Cartrawler Deal

By Mark Kleinman, City Editor

The owner of the high street chain Phones4u is closing in on a bumper takeover of Cartrawler, the owner of the Holiday Autos car rental brand.

Sky News understands that BC Partners, one of the UK's leading private equity firms, has seen off competition for Cartrawler from rivals Berkshire Partners and Charterhouse, to win a period of exclusivity in which to finalise the deal.

A transaction, which would be valued at well over £300m, could be signed as soon as Friday and would represent a higher-than-expected sale price, sources said.

ECI Partners, the firm which owns a controlling stake in Cartrawler, a Dublin-based provider of online car rental distribution systems, appointed PricewaterhouseCoopers (PwC) to run an auction last year.

A sale of Cartrawler, little more than two years after it last changed hands for about £80m, would come as private equity firms attempt to exploit strong demand from rivals to deploy a vast wall of capital accumulated in recent years.

The previous takeover of Cartrawler earned multimillion pound windfalls for Greg and Niall Turley, the brothers who founded the business and oversaw its expansion into more than 170 countries.

CarTrawler announced the acquisition of the online assets of Holiday Assets last summer, buying them from Travelocity Global, the immediate parent company of Lastminute.com, the online leisure bookings company.

That deal reunited ECI with Holiday Autos, which it had owned for several years before selling to Lastminute while it was a publicly-listed company in London in 2003.

CarTrawler, which has become a popular platform for companies to rent cars online, has annual bookings of around 5m vehicles, and sales of more than £425m.

Advent International, Kohlberg Kravis Roberts (KKR) and Montagu Private Equity were among the other buyout firms which expressed an interest in buying Cartrawler earlier in the process.

BC and ECI declined to comment.

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HS2 Tsar Needed For Project, Says Taskforce

A special HS2 minister should be appointed by the Government to oversee the £50bn high-speed rail project, a report from the scheme's growth taskforce has said.

The group said the appointment would ensure emphasis remained on growth and regeneration around HS2.

Led by Lord Deighton, the task force said the scale of HS2 was "without precedent" and "could catalyse far-reaching economic and social benefits, particularly to the cities of the Midlands and the North".

It continued: "So it is clear to us that we cannot expect to get the most out of HS2 simply by following 'business as usual'.

"We must set our sights high, challenge the status quo and be clear about our goal of building a truly transformational piece of national infrastructure."

It is hoped the scheme will boost regeneration

Lord Deighton made a reference in the report's foreword to a line from the film Field of Dreams, in which Kevin Costner's character hears a voice telling him to turn his farm fields into a baseball park and spectators would arrive.

Lord Deighton said: "This report makes clear that we must not take a 'build it and they will come' attitude to HS2.

"It is up to all of us to make the most of this unique opportunity.

"Our conclusion is that HS2 could be much more than a railway. It could be an exciting and transformational opportunity, particularly for our cities in the Midlands and the North, to invest in our future economic growth."

The scheme has attracted major opposition

A series of other recommendations to the Government are made in the report, which says a growth strategy should be established for each HS2 station by the end of 2014.

These strategies should explain how high-speed rail will generate local jobs, growth and regeneration, the report said.

It also said the Government and Network Rail should set out their plan for defining how HS2 will affect rail services for cities off the HS2 route and for rail freight, and also their plans for a wider review of rail services.

Stop HS2 campaign manager Joe Rukin said: "Lord Deighton has said there shouldn't be an 'if you build it, they will come' attitude to HS2, but that is how they have been operating for the last four years.

"While the case for HS2 only exists in a vested interest Field of Dreams, the reality of the project is a waking nightmare for the taxpayer."

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Mt Gox Finds 200,000 'Stolen' Bitcoins

One of the largest bitcoin exchanges says it has found 200,000 bitcoins which were thought to have been stolen by hackers.

Tokyo-based Mt Gox, which filed for bankruptcy last month, said in a statement the bitcoins were identified on March 7 after "old format" wallets were searched as part of its bankruptcy proceedings.

The company has not specified the type of "wallets", but they can include USB sticks and paper documents.

Another 650,000 bitcoins remain unaccounted for, the company added.

The online exchange for the virtual currency was switched off in February as rumours of impending insolvency surfaced.

It then filed for bankruptcy protection and claimed nearly all of its 850,000 bitcoins were missing. It blamed cyberattacks for the theft.

British bitcoin investor Kolin Burges, who initially invested $250,000 (£150,000) in 311 bitcoins, told Sky News: "The company are keeping very quiet and not saying what is going on.

"We may get a quarter to a third back but the worry is they will use this money to keep themselves going rather than paying it back to creditors and then shut down."

At current prices, the rediscovered bitcoins are worth around $120m (£73m).

The problems with Mt Gox have added to concerns over the viability of bitcoins.

The virtual currency has grown in popularity since it was created in 2009 as a way to make transactions without involving third parties such as banks.

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Putin Signs Crimea Annexation As Russia Warned

Vladimir Putin has completed legislation for taking control of Crimea, as David Cameron warned Russia it faces international isolation and tighter sanctions over the move.

As the Russian President signed the final annexation document in a Kremlin ceremony broadcast live on state television, Mr Cameron and other EU leaders imposed sanctions on 12 more people to punish Moscow for its takeover of the Ukrainian territory.

The EU also agreed to step up moves to reduce the bloc's reliance on Russian energy. Mr Cameron said EU members needed to do more to develop their own reserves, as well as their ability to use gas from overseas producers, including the US. 

Moscow celebrates the annexation of Crimea with a fireworks display

The Prime Minister said: "Our message to Russia is clear: choose the path to diplomacy and de-escalation or face increasing isolation and tighter and tighter sanctions.

"It was very important that the European democracies represented here should send a strong and united message that Russia should face further consequences, and that is what we have done.

"We have subjected 12 more individuals to travel bans and asset freezes, bringing the total to 33. We have cancelled the EU-Russia summit, agreed not to hold bilateral summits and we'll block Russian membership of the Organisation for Economic Co-operation and Development and the International Energy Agency.

"We have agreed to rapidly implement economic, trade and financial restrictions on occupied Crimea. We will only accept Crimean goods in the EU if they come from the Ukraine and not Russia."

Mr Cameron also refused to rule out further sanctions against several oligarchs, including Chelsea owner Roman Abramovich.

Pro-Russia supporters celebrate the annexation in Simferopol, Crimea

Beyond punishing Russia, the EU leaders also showed backing for Ukraine by signing an agreement which aligns the new administration in Kiev more firmly with Europe.

It came as the White House announced US President Barack would be embarking on a six-day trip to Europe on Monday, including The Hague for a nuclear security summit and a meeting of the G7, then to Brussels for a summit of European leaders and a meeting with the NATO secretary general.

He will also be going to Rome and the Vatican to meet Pope Francis, before leaving the continent to head to Saudi Arabia.

US National Security Adviser Susan Rice said: "What will be clear for the entire world to see is that Russia is increasingly isolated and the United States is leading the international community in supporting the government of Ukraine and the people of Ukraine and the imposing costs on Russia."

The EU measures come a day after the US decided to slap sanctions on Mr Putin's inner circle of money men and security officials.

Russia was accused by Ukraine of invading Crimea during recent unrest

US President Barack Obama said 20 individuals linked to the Russian government and a bank - Bank Rossiya - supporting those individuals would be targeted.

Moscow immediately responded by banning nine US officials and politicians from entering Russia. It has yet to take retaliatory action against the EU.

On Friday morning, Mr Putin mocked the planned Western sanctions against his country over its annexation of Crimea.

He was reported to have claimed he planned to open a bank account at the sanction-hit bank and steer clear of allies on a list of people facing sanctions as they were "compromising us".

The Russian takeover of the Black Sea peninsula has been largely bloodless, though one Ukrainian serviceman was killed and two others wounded in a shooting earlier this week.

But Ukraine's Acting President has vowed that the country will never accept Russia's seizure of Crimea.

Russia and other members of the Organisation for Security and Co-operation in Europe have agreed to send a six-month monitoring mission to Ukraine.

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Fortnum Boss Warns of Scots Vote 'Disaster'

By Mark Kleinman, City Editor, in Dubai

The chief executive of Fortnum & Mason, the upmarket London-based grocer has warned that a 'yes' vote in the Scottish independence referendum would be a "disaster" for the country.

Speaking exclusively to Sky News, Ewan Venters, a Scot by birth, said that a break-up of the United Kingdom would create a damaging period of uncertainty for businesses.

"I think it would be a disaster. The UK is better as one. We are a small enough island as it is, we don't need to become smaller," he said.

"The consequences of an independent Scotland and an independent England could be very unfavourable economically. That uncertainty is not what the country needs."

Mr Venters, who has run the Queen's grocer since 2012, is one of the most senior English-based Scottish businessmen to articulate his views about the implications of the referendum vote which takes place in September.

A former executive at companies including J Sainsbury and Selfridges, which is owned by the same family as Fortnum & Mason, Mr Venters also criticised the fact that he would not be allowed to take part in the vote.

"It is very disappointing that Scots like myself are not allowed a vote, when someone could be from any nation, move to Scot and be allowed a vote.

Fortnum & Mason is a favourite of the Royal Family

"It is an ill-conceived set-up of the referendum by those in the establishment who know that many of those who have moved away from Scotland to build careers elsewhere are in favour of the union remaining intact."

He is the latest in a growing number of executives and companies to speak out on independence.

In recent weeks, Alliance Trust, Standard Life and Royal Bank of Scotland have highlighted contingency planning being undertaken to prepare for a 'yes' vote.

In its annual report published this week, the defence contractor BAE Systems also said a vote in favour of independence could be disruptive.

Mr Venters, 41, was speaking in Dubai during a trip to mark the opening of Fortnum & Mason's first overseas store, opposite the Burj Khalifa, the world's tallest skyscraper.

Fortnum & Mason, which operated solely from its shop on London's Piccadilly for more than 300 years, was founded in 1707, the year that the Act of Union binding England and Scotland came into being.

Mr Venters wants the Dubai store, which has been developed in conjunction with AKI, a local partner, to be the first step in a carefully and gradually orchestrated expansion of the business.

"It is a very important milestone because customers from this region are hugely important at our Piccadilly store," he said.

"Fortnum has a long history of taking products to customers around the world," he said, which included exporting Christmas hampers to 112 countries towards the end of last year.

Dubai was chosen as Fortnum's first international outpost because of the Emirates' status as the most important luxury retail centre in the world, behind London, he added.

"Tea is the most popular drink after water here. As tea merchants for more than three centuries, we felt it was important to be here," he said.

Mr Venters cautioned against expectations that the Dubai opening would lead to a chain of Fortnum & Mason stores opening around the world, although he has now overseen the launch of two outlets in little more than six months.

Last autumn, the company opened a shop next to the Eurostar terminal at London's St Pancras station, with sales understood to be performing strongly.

"We will carefully consider other opportunities in what I call surging economies rather than emerging markets.

"This is a good moment to look at taking firmer positions in the world on a gradual basis."

"Over half of our business is made up of consumers living in the UK. That trend has increased in recent times as we have tried to make it more relevant to domestic consumers," Mr Venters said.

He described Britain's economy as "two-tier", with London the dominant force, adding that this week's Budget statement by George Osborne was "business-friendly and broadly friendly to working people of Britain by ensuring there's more money in people's pockets".

Mr Venters also waded into the debate about the future of Britain's troubled high streets, calling for a significant increase in residential development in order to stimulate wider usage.

"The opportunity for the high street has never been so good. The drive to buy more online means people are shopping on a more frequent basis.

"With some proactive housing policies on high streets and sensible movement on business rates, there is no reason why you couldn't start to see a revival."

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China 'Targets Foreign Firms To Boost Research'

Chinese investors are targeting hi-tech foreign firms to gain vital knowledge on research and development (R&D) techniques.

That is the reason behind a sharp rise in foreign investments, according to an article in the English language People's Daily - seen as an official source of Chinese government thinking.

In the report author Hao Jie said there was a "logic" behind a huge boost in key markets abroad.

"The rapid increase in China's investments in the US has its internal logic.

Outsourcing US hi-tech tasks has also helped China build IT know-how

"As the world's biggest mature market, with the most advanced technologies and the strongest R&D capability, the US will continue to attract Chinese investment.

"Areas with the greatest investment potential include infrastructure, energy, and middle and high end manufacturing."

She said that the investments helped Chinese companies improve their own R&D ability and "get closer to American consumers through developing local logistics and distribution channels".

Foreign direct investments (FDI) in the US have increased quickly in recent years.

Before 2011 private investments in the US were less than a third of the total, rising to 54% in 2012 and 76% last year.

A Chinese food firm agreed to buy the US' biggest pork processor for $1.2bn

Total investment in America doubled last year to a record $14bn (£8.5bn), according to the Rhodium Group.

Europe, as America's key mature competitor, has also been a hot spot for Chinese firms for investment and trade.

According to Eurostat, China's stock across the EU grew almost threefold in 2011, to €15bn (£12.5bn).

FDI has been seen as a way around certain restrictions placed on Chinese firms getting a direct foothold in Western countries.

Chinese direct investment was also ploughed into the US energy sector

China's telecoms giant Huawei has been thwarted in its attempts to establish foreign arms.

In 2012, Australia banned it from involvement in its $36bn (£22bn) national broadband network on security grounds.

Its founder was said to be linked to China's military and Australia's security agency Asio opposed its bidding.

Later that year, the US House Intelligence Committee said Huawei "cannot be trusted" to be free of Beijing's influence and recommended limitations on its involvement in public networks.

Chinese companies on US soil have been called a security threat

In July, a former CIA boss said Huawei spied on behalf of China, a claim the company denied.

Huawei already has a major foothold in Britain, but last December it was announced intelligence agency GCHQ would be given a greater role at the company's Cyber Security Evaluation Centre.

Since then intelligence agencies from the US, Australia and Britain have themselves come under increasing public scrutiny over their alleged spying activities on global telecommunications, in the wake of revelations by ex-NSA worker Edward Snowden.

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Business Round-Up And Week Ahead

Sky's Naomi Kerbel offers a round-up of what's coming up in the week's business news.

:: Monday March 24

On Monday, the Chancellor's budget "perk" to reduce beer duty by a penny comes into effect. 

:: Tuesday March 25

Energy provider, SSE will cut its dual fuel prices by 3.5% on Tuesday. The company's prices rose by 8.2% on average on November 15, 2013.

:: Wednesday March 26

On Wednesday, teachers who are members of the National Union of Teachers are due to strike against changes to their pay and pensions. 

:: Thursday March 27

It is a big day for Sky News Business on Thursday. At 7pm, Jeff Randall will host his final Jeff Randall Live business programme.

:: Friday March 28

On Friday, the ONS will deliver final growth figures for the fourth quarter in the UK. The last estimate showed growth of 0.7%.

Tweet your business stories to @SkyNKTweets

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Leahy Firm Leads Race For £1bn Dubai Group

By Mark Kleinman, City Editor, in Dubai

The private equity firm which employs Sir Terry Leahy, the former boss of Tesco, is leading the race to buy a German industrial group which has key operations in northern England.

Sky News understands that Clayton Dubilier & Rice (CD&R) is heading a field of four remaining bidders for Mauser, a German-based industrial packaging group owned by the ruler of Dubai.

Mauser, which makes drums for transporting medical waste and other hazardous materials, operates two UK facilities, at Batley in West Yorkshire and Littleborough in Lancashire.

The auction of Mauser, which is owned by Dubai International Capital (DIC), was narrowed in the last few days to CD&R, Ardian Partners, Pamplona Capital and Platinum Equity, according to insiders.

Blackstone did not table a formal offer for Mauser, while it is unclear whether Apollo Management, another party which had expressed interest in the group, did so.

The sale of Mauser, which is expected to fetch approximately £1bn, would leave DIC owning only two companies less than a decade after it pursued ambitious plans to become one of the world's leading private equity investors.

DIC is part of Dubai Holding, one of the groups owned by Sheikh Mohammed bin Rashid al Maktoum.

The Dubai-based group acquired Mauser in mid-2007, just as the first signs of stress in global financial markets were becoming apparent.

Dubai was forced to default on sovereign debt repayments in 2009 amid a slump in asset prices but has since successfully restructured its borrowings.

The emirate is now recovering from the financial crisis, with significant construction work resuming and international banks increasing staffing levels from the post-crisis trough of recent years.

Mauser has itself undergone a financial restructuring, announcing in May last year that it had won support from its lenders, which include HSBC and Royal Bank of Scotland, to amend the terms of its debt facilities.

DIC had contemplated a combined auction of Mauser, its UK-based aerospace group Doncasters and Almatis, a German aluminium manufacturer, but has decided to delay selling the latter two businesses.

Among DIC's other troubled investments was Travelodge, the British hotel operator, which it lost control of after its balance sheet became overstretched.

The auction of Mauser is being handled by Bank of America Merrill Lynch.

Mauser and CD&R, which owns companies such as the discount retailer B&M, declined to comment.

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Auction House Bonhams Eyes Sale Of Its Own

By Mark Kleinman, City Editor, in Dubai

It has secured a record bid for a painting in Russia and struck the most valuable purchase of an Old Master at auction.

Now Bonhams, the British auctioneer, is considering a deal of a different kind.

Sky News has learnt that the company's shareholders are bringing in City advisers to assess whether Bonhams itself should be put up for sale on the back of record profits.

Sources said on Saturday that Greenhill, an investment bank, had recently been appointed to conduct a strategic review, which will involve examining a range of options for bringing new capital into the business.

Bonhams, which has become a well-known name in the global auctioneering sector, specialises in selling fine art, classic cars and antiques.

It is jointly-owned by two businessmen: Robert Brooks, a former motor racing driver who has chaired the British Racing Drivers' Club, and Evert Louwman, a Dutchman.

Mr Brooks has said in the past that he wants to take advantage of Bonhams' strong balance sheet by building the company into a credible rival to Christie's and Sotheby's, the most famous name in the auction world.

It is unclear whether either of the existing shareholders would countenance an outright sale of their stakes.

Greenhill is expected to recommend the recruitment of a new investor, which is likely to attract interest from major private equity firms and sovereign wealth funds.

A stock market flotation is also expected to be considered although Mr Brooks has previously said that such a move was unlikely.

It is unclear exactly how much Bonhams would be valued at although City sources indicated that it would be several hundred million pounds.

Headquartered on New Bond Street in London, the current Bonhams was formed from a merger with Brooks in 2000, and has established a presence in Dubai, Hong Kong and the US.

The company was founded in 1793, and now claims market leadership in a number of areas, including the sale of Alfa Romeo, Aston Martin and Maserati cars for world record prices.

Last year, Bonhams saw profits more than double to £25m as wealthy buyers looked for alternative investment opportunities in a continuing environment of low interest rates.

Key sales in 2013 included a 1954 Mercedes Formula One car driven by the legendary Argentine racer Juan Manuel Fangio, which fetched £19.6m, and the Madonna Laboris, which became the most expensive Russian painting sold at auction when it attracted a £7.9m bid.

"2013 was a year where we saw the Bonhams brand establish itself further on the global stage," Mr Brooks told a newspaper last week.

'We have put significant investment behind growing a brand that can compete effectively in the key auction markets of the world."

A Bonhams spokesman refused to comment.

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