Fuel prices continue to climb

  • Cost of fuel rises again by more than 1p per litre 
  • Rise in fuel duty is second of three increases
  • Further rise in prices due in January 2011

UK drivers are having to pay even more for fuel as the latest increase pushes prices up by more than 1p per litre.

The latest duty rise, as of October 1, means you will pay an extra 80p to fill the average 70 litre tank.

Some supermarkets may absorb the hike for a while, softening the blow, but you can expect the cost to continue to climb.

This increase is the second planned rise with the third, of 0.76p, due on January 1, 2011. There will be a double blow to motorists as it will combine with a 2.5% increase in VAT on January 4. The spiralling price means you will be paying around 4p more per litre than you would have at the end of 2010.

The average cost of petrol is currently 120 pence per litre. Only around 40p of that is the cost of the fuel itself - approximately 57p is the duty added to the cost by the government, VAT represents 18p and the retailer/delivery charge accounts for the remaining 5p.

While the increases may seem alarming, don't expect your fuel bills to skyrocket. If you pay 116p per litre at the moment and drive a 2.0-litre car that does around 35mpg, covering 10,000 miles a year, you will pay £1,506 a year. If the prices rise to 120p litre, you would instead be paying £1,558 a year, an additional £52.

The rise in fuel prices will hit transport companies hard resulting in increases in the cost of goods being delivered. The 1p per litre rise in duty increases the cost of fuel for a single vehicle in a fleet by £600 a year, adding £125 million per year to the industry's bill in total, according to the Freight Transport Association.

The cost of fuel is now 3.2p higher than it was at the beginning of 2010, while prices are at least 10p per litre higher than October 2009. The new duty increases will earn the Treasury an estimated £500 million a year extra from all road users, with 22p of every £1 raised being spent on the road network.