RAC Cars News


Petrol Retailers Attack Treasury On Fuel Duty

By raccars Published

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The Petrol Retailers Association has demanded crisis talks with the Treasury, to encourage a reduction on fuel duty. With petrol prices falling in line with the price of crude oil, fuel taxes now make up a huge part of the cost per litre. If the price of fuel drops to £1 per litre, as expected, 75 pence of that will be taken by the government in taxes.

With petrol pump prices at 110.4 pence per litre, 24 pence of that is the retailer's wholesale fuel cost. 1.9 pence per litre goes on delivery and distribution costs, about 8.1 pence on retail profit, then 57.95 pence goes to the government for fuel duty, plus 18.4 pence on VAT. The price of petrol is predicted to go down to 107.6 pence per litre in two weeks, of which 69.2% will go to the government.

2014 marked the first year that fuel sales have increased since 2008, giving the government an unexpected rise in fuel duty revenue - a £400 million windfall, in fact. With Chancellor George Osborne publicly urging petrol retailers to pass on the lower cost of crude oil to consumers, the PRA suggests that only a cut in fuel duty can make a significant difference to the price of petrol and diesel at this stage.

Mr Osborne claims that the Treasury will be conducting an investigation into the behaviour of airlines, utilities firms and petrol retailers, related to how the falling wholesale cost of oil has or has not been passed on to customers.

Crude oil prices have spiralled downwards over the past six months by about 50%, to around $50 per barrel. This is the result of a number of factors, including lower demand from China, increased oil production in the US, as a result of the controversial 'fracking' process, and the refusal of the main Arabic producers to cut the supply of oil to drive prices up.

The government's demands to retailers to cut prices look a little redundant, given that only about 20-25% of the cost of a litre of fuel currently goes on the wholesale cost. The government is, therefore, earning far more at the pumps than retailers at the moment and the price of fuel in the UK is second only to Sweden in Europe.

The Treasury has responded with a reminder that fuel duty has been frozen since 2011.

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