Bad Time For Fuel Duty Increase Say Petrol Retailers

The increased tax revenue from current high fuel prices means that there is no justification for the two pence per litre fuel tax increase, and this must now be cancelled or postponed by the Chancellor,’ according to Ray Holloway, Director of the RMI Petrol Retailers Association (PRA).

The tax increase scheduled for Tuesday 1 April 2008 was set in place in last year’s budget. Since then, the economic situation has changed.

Holloway explains: ‘Investment in oil refinery facilities does not match the worldwide increase in demand for fuel, so supplies of refined petrol and diesel are being stretched. This has forced prices upwards in the UK. The retail price of motor fuel rose by around 20 per cent during 2007 as a result of this. Even without the tax increase, the trend will continue in 2008.’

Holloway believes price pressure will increase as summer approaches: ‘The dollar remains weak and crude oil producers continue to pump more to offset their financial losses from this. The oil industry must also prepare for peak summer demand by buying stocks in spring, forcing prices upwards. Compounding this is the fact that Easter is traditionally when demand for petrol and diesel starts to grow, initiating the summer upward price momentum. Easter is early this year, so prices are going up earlier. All this means that the Chancellor will receive higher fuel duty revenues even if the increase does not take place.‘

Holloway adds: ‘It would be best if the fuel duty increase were cancelled, or at the very least postponed. In the past, fuel duty increases have been announced in the budget, but delayed until the following autumn, to allow for the increased prices during the summer months.  This was a sensible approach which should be continued.’