Highlights 

• The UK government suspended its competition law and activated the Downstream Oil protocol to allow fuel suppliers, hauliers and others to better coordinate with each other and supply fuel to the most affected sites.
• The PM is also mulling deploying the army to aid in fuel deliveries, as a lorry driver shortage has affected petrol supply.

The UK government’s business secretary Kwasi Kwarteng suspended the Competition Act of 1998 on Sunday night in a bid to curb panic buying of fuel amid a rising petrol supply crisis.

Following the suspension of the competition, Mr. Kwarteng also activated the Downstream Oil Protocol, which allows hauliers, oil suppliers, producers and others to collaborate together to prioritise the supply of fuel to the most scarce and strategic areas across the country.

UK’s Prime minister Boris Johnson also said he was considering deploying the army to deliver fuel to petrol pumps. He is expected to decide on recruiting the military’s assistance by today.

The development comes after consumers started stockpiling petrol as more and more forecourts across the country turned empty.

Crisis and Brexit

The industry-wide fuel shortage comes as a deepening supply chain issue has gripped the UK and affected other sectors as well. A Brexit related workforce scarcity has left fewer qualified HGV drivers in the UK, adding to the supply chain challenge. 

Brent oil futures also touched a 3 year high today, rising on the back of more and more people switching to crude due to a major natural gas shortage across the UK and improving global macroeconomic conditions.

The rise in crude oil futures is expected to put further pressure on the current petrol shortage and add to UK’s inflation concerns as well.

Let us take a look at 2 FTSE 100 oil and gas stocks which are also petrol retailers in the UK, and how they have reacted to the development today:

1. BP PLC (LON: BP)

Oil giant BP is the largest petrol operator across the UK. The company had closed some of its fueling sites last week, citing fuel shortage due to scarcity of lorry drivers.

The group stated today that about 30 per cent of its 1,200 branded petrol sites did not have the main fuel grades due to the staggering rise in demand over the weekend.

BP’s concerns of being able to continue its fuel deliveries due to the lorry driver shortage were what had caused stockpiling by consumers over the weekend.

(Image Source: Refinitiv)

BP’s shares were trading at GBX 326.70, up by 2.03 per cent today at 12:53 PM BST. The FTSE 100 index was trading almost flat at 7,052.03, up by 0.01 per cent.

The company’s market cap stands at £64,141.38 million, and its one-year return is at 39.99 per cent as of 27 September 2021.

2. Royal Dutch Shell (LON: RDSA)

Royal Dutch Shell is another British oil giant, having upstream to downstream operations. The group stated that it had seen a higher-than-normal spike in fuel demand since Friday.

Shell added that the rise in demand had caused it to run low on certain fuel grades in some of its forecourts.

Meanwhile, Shell, BP, Exxon Mobil’s Esso and other petrol retailers imposed a £30 limit on petrol buying in order to cap this stockpiling behaviour.

(Image Source: Refinitiv)

Shell’s shares were trading at GBX 1,567.80, up by 2.52 per cent today at 12:56 PM BST. The fossil fuels sectoral index was trading at 5,599.06, up by 2.46 per cent.

The company’s market cap stands at £62,716.15 million, and its one-year return is at 55.95 per cent as of 27 September 2021.

Bottom Line

Despite the current petrol supply crunch, industry analysts expect that supply and demand will eventually level off in few weeks. The spike in demand has been due to the hoarding of supplies, which will lead to lower consumer demand in the coming weeks as motorists use the petrol they have stockpiled.

Retailers and other sectors have raised a warning ahead of the Christmas season, as the UK’s supply chain disruptions are expected to continue affecting other sectors as well. Buyers can be expected to see a turkey shortage, delays in toy stores and other areas.