UK motorists are unlikely to see any price cuts at the pumps following the 1p reduction in fuel duty because the wholesale price of oil is still rising.
The RMI Petrol Retailers Association, which represents two thirds of the 8,800 independent fuel stations in the UK, said that the duty cut will be wiped out by increasing oil prices, the inflationary price rise in January and the 1p fuel duty increase planned for August next year.
Its press release said: “Wholesale costs have continued to rise this week with unleaded up by nearly 2p per litre and diesel up by 1p per litre. Thus prices at the pump will continue to rise irrespective of the duty reduction.”
It went on: “The Chancellor has lined up an horrific tax outlook for 2012 with inflation only increases on both January 1 and August 1. Assuming RPI (inflation) continues at the present 5.5% and VAT at 20%, these increases will both represent 4p per litre at the pumps, thus a massive 8p per litre increase overall.”
Anecdotal evidence suggests that there’s been little change in price at the pumps even though Chancellor George Osborne claimed oil companies will be footing the bill for the 1p cut in fuel duty.
Osborne said the Government will be watching them ‘like a hawk’ to make sure they don’t transfer a charge to the pumps.
But large companies such as BP, Shell and Texaco will not be footing the bill, it will be small scale companies operating in the North Sea that are subject to the 12% Supplementary Charge increase announced in the Budget yesterday.
These companies cannot pass the cost onto the consumer because the price of a barrel of oil is set by world markets so they will have to absorb the tax increase themselves.
Malcolm Webb, chief executive of industry body Oil and Gas UK explained that the increase in Supplementary Charge from 20% to 32% was a bolt out of the blue to North Sea oil companies.
He said: “In its first Budget nine months ago, the Government recognised the importance of a ‘stable’ UK oil and gas tax regime which provided ‘certainty for investors’. Given that assurance, the industry is shocked to now be hit by a tax increase.”
The UK offshore industry currently accounts for a third of total industrial investment in this country. This investment supports nearly half a million jobs. Last year, 60% of the UK’s total energy requirements were met by oil and gas produced from its own reserves.
Webb added: “This move will only damage investor confidence and make many question whether the UK is an appropriate destination for their investment. Many of our members will now be reappraising their investment decisions.”
Find out why Osborne’s decision to cut fuel duty is shortsighted in our latest blog.
Following the Budget, a recent survey by the RMI has seen a drop in fuel prices, but not by as much as 1p/litre. It showed the average cost of a litre of unleaded was now 132.9p, down from 133.2p. Diesel prices fell by the same amount, now averaging 139.7p per litre.
