Fall in oil prices ‘could prompt fuel duty rise’
Recent months have seen a considerable fall in the price of oil and this has resulted in widespread reductions in the cost of petrol and diesel across the UK.
While motorists up and down the country may now be celebrating this unexpected windfall, it does pose the question of what the government might do given the new economic environment, as many filling stations are now offering prices not seen in more than a decade.
Chancellor of the Exchequer George Osborne took the popular step of introducing a freeze on UK fuel duty way back in his Autumn Statement of 2011 and it has been held at the same level ever since.
However, given the fact that no such commitment was made in his latest Autumn Statement this year, the prospect has now become very real that a rise in duty could soon be witnessed.
Outlining the current situation, Fuel Watch spokesperson Simon Williams told Fleet News: "The reason why business motorists are currently enjoying lower diesel prices is as a result of the fall in world crude oil prices, which followed the high of $115 a barrel in June 2014."
During the course of the last year though, oil production volumes have spiked across the globe and this, in turn, has led to a considerable downturn in the value of both Brent crude and US light crude oil in international commodities trading.
Currently down below $40 per barrel, the price of oil is now around one-third of the cost seen just 18 months ago.
Mr Williams added: "Looking ahead to 2016, this has made the idea of paying £1 a litre at the pumps for unleaded petrol a reality for the cheapest retailers and we would expect to see the price of diesel also continue to fall."
In response, the Office of Budget Responsibility (OBR) has released a new report highlighting the potential benefit to government coffers of a rise in fuel duty – a situation the government may feel that motorists would be less likely to object to due to the present low costs being seen.
According to the OBR's findings, the Treasury would be able to accumulate an additional £2.3 billion between 2015-16 and 2020-21 should fuel duty begin to rise with retail price inflation (RPI) from April next year.
Indeed, the report stated: "The government has told us that its policy is to uprate duty rates in line with RPI inflation each year from April 2016.
"This uprating assumption could be considered a source of policy risk to the forecast, given repeated decisions to cancel planned duty rises in recent years."
Finally, a poll of UK drivers carried out by Fuel Watch at the start of 2015 asked members of the public to predict the price of petrol and diesel across the UK by the end of the year.
Its results showed that fewer than one in five (18.6 per cent) respondents had forecast values would be under £1 per litre – yet this is a situation that now appears likely to be the case in many parts of the country come January 1st 2016.
It may not be a level of cost that lasts for long though, as if the OBR's report is to be believed, the government may already be laying the groundwork for a fuel duty rise that could push up prices once more in the new year.
January 6, 2016 | Share: