By Alisdair Suttie 11 January 2012
Wednesday 11 January 2012. Fleet Voice Column.
The season of goodwill is well and truly over, and the season for increased fuel prices is upon us.
In all honesty, the season for every higher fuel prices generally runs from 1 January through to the 31 December of each year, so this news should come as no surprise.
However, there is a surprise and it’s that fuel prices rose by 4.5ppl (pence per litre) over the Christmas break. Between 19 December and 5 January, just as most of us were enjoying a well earned few days off, diesel went up by 4.5ppl and petrol in some areas exceeded this to shoot up by 5.0ppl.
These are astonishing increases, brought on by a variety of circumstances that have combined to have a disastrous effect on the cost of fuel.
One of the main reasons for upward oil prices, which push the cost of fuel skyward, is the increasing risk of conflict in the Middle East with Iran. The Iranians are flexing their muscles to counter the European Union trying to enforce an embargo on crude oil supplies from this country. The upshot is Iran is now threatening to blockade the Straits of Hormuz, where almost half of all of the world’s oils supplies pass.
Another reason for spiralling fuel prices in the UK is the freezing of loans worth $1 billion for Petroplus Holdings due to worries over EU refinery activity and diesel capacity. Petroplus has had to shut down three of its five plants as a result, causing a shortage in the supply chain.
Add in the seasonal increase in prices usually seen towards the end of a year and fuel prices have been squeezed till the pips squeak.
For many private motorists, the only solution to the hugely increased cost of fuel compared to only a couple of years ago is to reduce the amount they drive. The RAC reckons more than half of all privately owned cars are now being driven fewer miles than two years ago and the cost of fuel is the major reason.
For company car drivers, reduced usage is not generally a realistic option as we need our cars to get to appointments and meetings, often in places where public transport simply cannot reach in a time- and cost-effective manner.
This leaves us shouldering the burden of fuel prices, which is an iniquitous task as much of the cost of fuel is down to the taxation levied on it by the Government.
Admittedly, the amount of tax the Government extracts from the cost of every litre of fuel has gone down slightly.
However, when the pump price has increased so dramatically, the Exchequer is still quids-in thanks to the larger portion it collects in VAT. With VAT having risen to 20% from 15% only a couple of years ago, the Government’s coffers are fatter than ever with cash from fuel.
The Retail Motor Industry Federation’s (RMIF) RMI Petrol believes we have not seen the worst of fuel price rises, either. It reckons diesel could hit nearly 146ppl, with petrol not far behind at 141ppl.
Even though the RMIF represents petrol retailers, who have been operating on wafer thin margins from fuel sales, the RMI Petrol body knows price hikes are not the way forward.
For this reason, the RMI Petrol’s Chairman Brian Madderson says: “This is a very worrying development, but not entirely unexpected. I wrote to the Chancellor on 2 January highlighting the serious supply issues ahead. Fuel taxation is the only direct control over rocketing fuel prices which are undermining our society and our economic recovery.”
In his letter to George Osborne, Mr Madderson points out: “While all taxes are unpopular, it is suggested that fuel tax tops the list because as you (the Chancellor) said to the House in your Autumn Statement ‘Fuel is not a luxury for most people, it is a necessity’.”
By openly recognising this fact, Government must also recognise it is a deeply flawed tax as being unrelated to wealth or income, it becomes a consumption tax and therefore penalises working families, lower income earners, rural dwellers and many other sectors of our society.
To counter the increasing cost of fuel, Mr Madderson goes on to ask the Chancellor to consider measures to ease the heavy cost to the UK’s drivers. He says: “RMI Petrol believes the time is now right for fuel taxation to be reconsidered and reformed ahead of the next planned duty increase on 1 August 2012, which will add a further 4.0ppl to pump prices after incorporating 20% VAT.”
The RMIF is a loud voice in the corridors of power, but whether or not it will resonate sufficiently to see fuel duty reduced or delayed is another matter. The Government is keen to reduce the debts of the UK and put the country’s accounts back into the black, or at least less deeply into the red.
Voluntarily giving up a lucrative tax influx from higher fuel duty would be a bitter pill for the Chancellor to swallow when he has had to stand up against many other forces wanting some relief from the austerity measures introduced to counter the country’s financial woes.
However, when the cost of fuel affects almost everyone in the UK, either directly or indirectly, there is a strong case for George Osborne to reconsider the vicious tax increase put in place by the previous Labour administration.
As company car drivers in the UK work harder than ever to keep their jobs and businesses on an even keel, the oil industry supertanker needs some skilled helmsmanship in these troubled waters.
Like a supertanker, the oil industry can be slow to react, but we need decisive action now if this leviathan industry is not to bring the UK, and many other countries and economies around the world, to its knees and the danger of double dip recession.
What may seem like a small relief in the shape of a few pence per litre of fuel not collected by the Treasury could make all the difference between recovery or languishing in the doldrums for Britain’s economy.
The sooner we get out of the current stagnant period and back to growth, the better it is for all of us, and that requires the nation to be able to get about its business.
Let’s just hope there’s sufficient residual seasonal goodwill swilling about Westminster for the Chancellor to give us a much needed respite from even higher fuel bills.
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