There's a catch with falling petrol prices

May 21, 2010 4:39 PM

Yesterday Asda cut the cost of petrol by 2 pence. The move sparked a domino effect with Morrisons, Tesco, Sainsbury and Shell all following suit.

The supermarket's fuel prices are currently 115.9p a litre for petrol and 118.9p a litre for diesel. This will be welcomed by motorists who have endured record pump prices for several months now.  Some have blamed high prices on retailer profiteering and not passing on savings to motorists when oil prices were lower.

Of course the incessant fuel duty hikes have done little to ease high petrol prices. March’s budget announced a 3p increase in fuel duty and although it was staged to “ease the pressure on business and household incomes” it is still a significant tax rise.

The inability of politicians to get a control on the public finances has also seriously affected motorists because the value of the pound has been falling. As oil is priced in dollars the weaker pound has made it more expensive for us to get the dollars we need to buy oil.

The move from Asda and its domino effect will be welcomed by motorists. However there is a reason to be cautious of the price slash from retailers. Last week when Transport Secretary Philip Hammond announced the coalition government would “end the war on motorists” he also announced the introduction of a “fuel price stabiliser”. The fuel price stabiliser will essentially reduce taxes if the price of oil rose sharply, however, fuel duties would rise if the cost of petrol and diesel fell. So when the fuel price stabiliser is in place a reduction by retailers in petrol prices would be counteracted by a tax hike.

If this government is serious about ending the war on motorists they need to reduce fuel duty, which constitutes 65 per cent of the pump price for unleaded petrol and 64 per cent of the pump price for diesel.  Yesterday Asda cut the cost of petrol by 2 pence. The move sparked a domino effect with Morrisons, Tesco, Sainsbury and Shell all following suit.

The supermarket's fuel prices are currently 115.9p a litre for petrol and 118.9p a litre for diesel. This will be welcomed by motorists who have endured record pump prices for several months now.  Some have blamed high prices on retailer profiteering and not passing on savings to motorists when oil prices were lower.

Of course the incessant fuel duty hikes have done little to ease high petrol prices. March’s budget announced a 3p increase in fuel duty and although it was staged to “ease the pressure on business and household incomes” it is still a significant tax rise.

The inability of politicians to get a control on the public finances has also seriously affected motorists because the value of the pound has been falling. As oil is priced in dollars the weaker pound has made it more expensive for us to get the dollars we need to buy oil.

The move from Asda and its domino effect will be welcomed by motorists. However there is a reason to be cautious of the price slash from retailers. Last week when Transport Secretary Philip Hammond announced the coalition government would “end the war on motorists” he also announced the introduction of a “fuel price stabiliser”. The fuel price stabiliser will essentially reduce taxes if the price of oil rose sharply, however, fuel duties would rise if the cost of petrol and diesel fell. So when the fuel price stabiliser is in place a reduction by retailers in petrol prices would be counteracted by a tax hike.

If this government is serious about ending the war on motorists they need to reduce fuel duty, which constitutes 65 per cent of the pump price for unleaded petrol and 64 per cent of the pump price for diesel.  

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