I am grateful to be here today as your last slot of the day – and have enjoyed getting to know a few you over lunch. This is my first Summit since I joined UKPIA in April last year.
My colleague, Jamie Baker, has spoken here in previous years about some of the long-term challenges affecting the forecourt sector, as well as the changes you might expect to see in fuels provided by UKPIA members.
Today, I want to focus a little more on the historically significant and operationally challenging events of the past year and how I think the UK is doing at steering a course through this period of instability and change.
I’d like to consider the challenges experienced in 2022 since last year’s summit and what they really mean for our sector today and in future.
Perhaps the most unexpected feature was the emergence of Just Stop Oil and their very targeted campaign aimed at our sector. There were new issues to deal with: protestors locking themselves to machinery and buildings; obstructing major terminal sites, committing criminal damage to trucks; and then latterly obstructing and damaging forecourts.
UKPIA spent a lot of time and resource trying to work with the police and courts to remove those breaking the law as well as making sure the public was not panicked into overreacting.
How has this changed our sector?
We have learned how to try and put off would-be protestors – with the delivery of legal civil injunctions. Some locations have increased their on-site security and we have become better practiced in getting forecourt deliveries back up to speed when stocks are diminished through lost deliveries.
But as so often before in times of alarm, we responded well as a sector and came together with government to address this new threat such that it then moved on to other targets.
We did, however, see a new defiance from government: despite the protestors’ asks to stop new oil production licences, they did not do this. I believe this emphasises that - while it may not always feel like it – government does still realise the need to keep fuels flowing, now and for the coming years.
Another challenge last year was with the political turbulence which took over the news cycle.
Disruptions came from the mini economic crash, scrutiny on pump prices and even continuing into this year with yet another reshuffle.
Upheaval in Westminster has seen endless delays on the Energy Bill we need to progress hydrogen and carbon capture, and it has led to delays on the Low Carbon Fuels Strategy from DfT which we had expected by the end of last year.
Even the quick work we saw with Chris Skidmore’s Net Zero Review has left us with relatively familiar conclusions with the main emphasis being to tell government that it cannot keep wasting time!
However, Russia and its illegal invasion of Ukraine was perhaps the most pervasive challenge we saw in 2022.
I shan’t remind us of the terrors seen by those in Ukraine, but certainly the impacts of that war on global trade and in particular the energy sector have been severe in our own relative terms.
We saw rapid action in the sector with voluntary and then sanction-based weaning off Russian oils.
Russian diesel was almost a fifth of our total demand in recent years and we have paid a very large price at the pumps for this reliance, despite there not being any actual shortages in diesel.
Ultimately though, we have seen a change in how comfortable government is relying on other countries such as Russia for fuel and energy, with a growing level of concern about the UK’s supply security.
All those challenges in 2022 - whether they be global in nature self-inflicted by our political leadership or because of a minority seeing oil as the problem rather than part of the solution – have one thing in common: the sector was able to cope with them all.
The events of 2022 have changed the landscape of what lies ahead of us….
Amidst the political uncertainty, and despite the protests of Just Stop Oil – the perception of the benefits of our industry as well as its possible role in meeting Net Zero have changed in both a positive way and a challenging way
As we move onwards to the middle of the decade, to secure our future, we as an industry need to provide two things:
Secure energy – with the reliance on petrol and diesel not falling away as quickly as many thought.
And rapid change that can deliver low carbon fuels and lower emissions in making and supplying them.
We are already doing those things, but I think there is an opportunity now for us to increasingly emphasise the importance of the fuel supply chain in terms of resilience in order to press with government that they need to support us better in terms of changing for tomorrow if they expect to continue to benefit from the security of fuel today.
While the JSO protestors show us that the role of our sector in the green transition is not universally appreciated, our sector is beginning to make changes to both reduce its own emissions as well as enabling other industries to reduce theirs too.
In order to make those changes we need profits to pay for the security and sustainability which are coverted by Government.
The UK is slipping behind in the global race to net zero.
Analysis from OC&C consultants shows that as the cost-of-living bites as little as 27% of the UK’s car fleet will be an EV by 2030….
We also have estimates that the UK may be twenty-five thousand EV mechanics short to support that target even if it can be met.
We have industrial clusters like those in the North West and on the East Coast waiting for government to pass legislation so they can spend the hundreds of millions of pounds they are wanting to invest in hydrogen and carbon capture at scale.
And we’ve also seen slow movement on hydrogen in transport. Whilst we await funding decisions to enable its production, Shell’s filling stations will be decommissioned as the wider hydrogen market remains stunted.
Against that worrying backdrop in the UK, we have seen the US invest three hundred and eighty-nine billion dollars in the green economy with its Inflation Reduction Act.
The EU has also taken the bull by the horns with its carbon border adjustment mechanism that looks to reward EU manufacturers for reducing their emissions rather than moving production overseas where there is less regulation.
If we look at the policies the UK does have, it is a mixed bag….do we really have the walk to go with the talk?
We have the positive announcement of the Sustainable Aviation Fuel Mandate which shows us we need to produce low carbon liquids – but then we don’t have any clarity on how it will work or what levels of fuels are expected when it is deployed in 2025.
We had the positive strategy for low carbon fuels announced at the end of 2021, but we are still awaiting details – to find out what volumes will be needed, what feedstocks and production methods will be allowed to prosper.
We also see that our manufacturing sector has the highest carbon costs in the world which were designed to incentivise low carbon production - but it has few protections to stop less regulated more carbon-intense countries from taking market share and undermining our competitiveness.
And we also have an effective biofuels obligation that delivers carbon savings of 2 million cars a year, but no acknowledgement that more can be done with those fuels nor hard tax incentive reward the consumer for buying low carbon fuels rather than the fossil fuel equivalent.
In terms of other vital technologies like hydrogen and CCUS – the Energy Bill has been discussed for months, but until it is signed off the essential rules and government powers needed for early projects’ final investment decisions are not available, meaning no one can yet invest in those big technologies.
As we entered 2022, bleary-eyed but optimistic after two years of COVID, that hoped for bounce or even just a stable market was far from what we have experienced. We may even have more uncertainty now than ever before to factor in as we make our business decisions.
But who wants to end on that low note.
Government recognises that our fuels remain important. They are clear that Net Zero policies will be pursued, even if progress on those policies is slower than we might like.
With the certainty which we do have, UKPIA will work with government to unlock new business models.
We will also challenge government to break down those barriers that stop us from being competitive day to day, and which could also therefore stop us delivering on the net zero ambition.
We need to ensure that the ingenuity of businesses in the sector are allowed to shine through, so that we can be ambitious and help the UK become that world leader it aspires to be.