European markets rose on Monday morning after a frenetic weekend in the UK which saw several petrol pumps empty of fuel and massive queues where it was still available even as ministers appealed to avoid “panic buying.”
The spiralling petrol crisis also forced the government to suspend competition law via the Downstream Oil Protocol to help oil companies to work together to deliver fuel to petrol stations that are running dry. The protocol would help fuel producers, suppliers, hauliers and retailers to prioritise the delivery of fuel to the parts of the country and strategic locations that are most in need.
The UK’s business secretary Kwasi Kwarteng agreed to temporarily exempt the industry from the Competition Act 1998 after a meeting with oil companies and retailers on Sunday. This will allow oil companies to share information and optimise supply without risking breaching competition rules.
Angela Merkel’s Christian Democratic Union (CDU) came second behind the Social Democratic Party (SPD) which received the largest share of the vote. The SPD got 25.7% of the vote while chancellor Merkel’s CDU/CSU bloc got 24.1%. The Greens are in third place, with a record 14.8% vote, putting them in a key position when it comes to forming the government. The verdict means the parties will need to form a coalition government, with negotiations that could take months.
UBS analyst Paul Donovan said in note: “Markets are not likely to be concerned for now.”
In the UK, meanwhile, according to some media reports prime minister Boris Johnson is considering using the army to deliver fuel to petrol stations across the country. Johnson is expected to consult senior members of the cabinet about “Operation Escalin,” an existing Ministry of Defence contingency plan to ensure petrol stations don’t run dry in the event of a supply crisis.
Environment minister George Eustice, however, told Sky news the government was not considering using the army to help with fuel deliveries. “We’ve no plans at the moment to bring in the army to actually do driving,” Eustice said.
Watch: UK panic buying, up to 90% of fuel pumps dry
The Petrol Retailers Association (PRA), which represents almost 5,500 independent outlets, said 50% to 90% of its members had reported running out of fuel and has predicted that the rest would soon follow.
UBS, in its note, said the crisis was down to supply and demand issues: “Reports of supply chain shortages led to panic buying of petrol. Demand exceeded the exceptional supply in some areas, closing petrol stations. In a week or two, demand is likely to be below normal, as people use the fuel ‘stockpiled’ in their vehicles.”
Nordea Investment Funds, an asset manager, pointed to the larger shock the UK economy is going through — linked to higher inflation, supply-chain disruptions and the loss of low skilled workers from the EU.
“The consequence is over the past few days a wave of panic in petrol stations forcing the British government to elect for temporary visas for truck drivers (far too few in too poor a condition) and to possibly send the army to do deliveries. The impact on delayed growth and higher inflation may be sizeable and more so than forecasts suggest. What is distinctly not British is the excessive pessimism on growth next year,” said Sebastien Galy, senior macrostrategist at Nordea.
Markets in Asia, meanwhile, have mostly started the week on a positive note, with the Hang Seng (^HSI) up 0.28%, Nikkei (^N225) up 0.04%, and the Kospi (^KS11) 0.25%. The Shanghai Composite (000001.SS) was down -1.30%, as materials (-5.91%) and industrials (-4.24%) in the index have significantly underperformed, which comes amidst power curbs in the country, according to a note from Deutsche Bank.