Petrol prices set to hit record high

Most motorists dread the trip to the pumps to watch the pounds shoot up on the counter, compared to the snail-like pace of litres used. That feeling will get even worse as the price of petrol hits 120p a litre nationwide, as is expected in the next few days.

120p a litre would be even higher than the record 119.7p, which motorists experienced back in July 2008. However the looming rise cannot be blamed on the high price of crude oil. High pump prices  in 2008 owed much to the $147 a barrel cost of oil but it is currently a low $78 a barrel. 53 percent lower, in fact. 

So why the rise? Well MPs, motorists groups and oil companies all cite different reasons. MP Lindsay Hoyle on the Business Select Committee stated “Motorists are being legally mugged on the forecourt by petrol companies.” Strong words. Indeed, the price of wholesale petrol has risen 17 percent since January.

However other groups have warned that the steep rise is because of the recession. Platts, leading analysts in the oil market, said that refiners have had to cut back in the recession – some have even closed - which has caused a fall in supply. Similarly the UK Petrol Industry Association blamed the declining value of the pound as reason for higher prices as crude oil is priced in dollars.

But one thing is clear, the situation will only be exacerbated if the Treasury go ahead with the expected 3p per litre duty rise at the forthcoming budget. This will be on top of the 2p per litre rise, which was enacted in September 2009’s Pre-Budget Report.   

Record high petrol prices –coupled with a tax hike - are severely detrimental for economic revival in Britain, which has so far been sluggish. As Edmund King from the AA said "The UK is barely out of recession yet petrol prices threaten to rise to record prices seen during the boom of 2008 – shortly before the collapse into recession. If families, drivers on fixed incomes and those on low pay were unable to cope with record prices then, they are even less likely now."

One would hope the government will learn from the petrol protests in 2000 - motorists were rightly fed up of the ever rising pump prices largely driven by excessive fuel duty. More than 250 petrol stations are already charging 120p a litre for unleaded petrol and diesel and this is set to spread to across to forecourts around the country in the next few days. The last thing drivers and businesses need is the price of fuel to be pushed up even further by an unjustified tax rise.

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