RAC warns Chancellor of negative impact of fuel duty rise as pump prices stay stable
That’s the finding of the latest RAC Fuel Watch data as the organisation warns the Chancellor of how a rise in fuel duty in this month’s Budget would impact on the UK economy.
The RAC data shows that February brought a small fall of 0.16p in the price of unleaded at the pumps. The wholesale price of petrol also finished the month 2p a litre cheaper than at the start due to increased petrol production, which should help to keep pump prices at their current level in the short term, or possibly even reduce them very slightly in March.
The RAC Fuel Watch February report also shows that the price of diesel at the pumps remains largely static, rising from 101.11p to 101.18p, despite a 2.5p rise in its wholesale price. While this is a turnaround from January, which saw a 5p reduction, the average price of diesel is still nearly a penny cheaper than that of petrol (diesel – 101.18p v petrol 101.93p). The average forecourt price of diesel has been lower than petrol since 25 January 2016 but is likely to switch back again in March.
Average supermarket prices of both petrol and diesel hardly changed in February: petrol started the month at 99.88p and finished at 99.86p whereas diesel rose marginally: 97.96p to 98.24p.
Both the oil price and the exchange rate – the two factors which have the greatest effect on fuel prices aside from tax – were the subject of much attention in February. The pound lost ground against the dollar throughout the month, falling from $1.44 on 1 February to $1.39 by the end, while oil underwent a late price surge to finish at $35.80 having started the month at $32.75.
RAC fuel spokesman Simon Williams said: “While the average pump price of diesel has been cheaper than petrol since the end of January (25 January 2016) this may not last much longer due the increase in petrol production and its lower wholesale price. But the additional supply of diesel on the wholesale market brought about by greater refinery capacity in Saudi Arabia and India should mean prices remain comparatively stable for diesel motorists at the pump.
“If it proves to be the case that oil prices have bottomed out, the RAC will be monitoring the effect on pump prices even more closely for any sign of the infamous ‘rocket and feather effect’ where prices go up far faster than they came down.”
Commenting on a possible fuel duty in the Budget, Williams added: “Both independent modelling and the Treasury’s own analysis have demonstrated that an increase in fuel duty has a negative impact on economic growth and therefore we vehemently oppose any rise in fuel duty because the country would the pay the price for this in the longer term.
“Motorists will be unforgiving of the Chancellor should he seek to squeeze more tax out of them when they are already amongst the highest taxed on fuel in Europe.”