Some good news for drivers and the motor trade as the Prime Minister is to confirm there will be no increase in fuel duty and the tax levied on petrol and diesel is to be frozen at 57.95 pence-per-litre.
It was widely considered the Chancellor of the Exchequer would up duty on fuel after mentioning the ongoing cap on duty was costing the Government upwards of £38 billion every year.
A fuel increase would have raised £800m in extra revenue for the Treasury in 2019, and billions more over the coming years.
Theresa May did acknowledge that there had been discussions about ending the ongoing fuel cap. “Some have wondered if there would be a thaw in our fuel duty freeze this year,” she said. “Today I can confirm that in the budget later this month, the chancellor will freeze fuel duty again.”
Simon Williams a spokesman from the RAC said “drivers are currently paying the highest prices at the pumps for four years.” He also stated, “higher wholesale costs may well be passed on to drivers at the pumps imminently”.
With the cost of petrol at a four-year high we have seen it rise by an average of £7 over this last year to fill a tank, with both diesel and petrol costing 13 pence-per-litre more than it did 12 months ago, and the experts don’t expect it to change any time soon.
Jason Lloyd of PetrolPrices.com, said: “Finding the cheapest fuel can be a postcode lottery, as motorists on average can spend over £200 a year more simply because of where they live.” Which is a lot of money to most drivers of new and used cars, money which could be better invested in other motoring expenses like an insurance policy for example.
So why is fuel so expensive?
The fuel price can be divided into sections:
- Government taxes
- The drilling costs, transporting and refining
- Fuel companies profit margins
For petrol and diesel, the Government gets around 65 per cent of the overall cost through fuel duty and value added tax (VAT). Currently, the Treasury adds 57.95 pence to each litre of fuel through duty and another 20 per cent through VAT.
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The wholesale cost is a combination of currency exchange rates, global oil prices, and even domestic supply and demand.
Although many motorists think petrol stations are reaping in massive profits, the reality is that despite global oil prices tumbling an average forecourt only makes 2 to 5 pence of profit per litre of fuel sold.
Even though the cost of a barrel of oil has dropped over the last 10 months from $106 (October 2014) to $77.54 (August 2018), the pound has fallen in value against the dollar. Back in 2014 £1.00 was worth $1.70 but now the same pound only converted to $1.29 in August 2018. Meaning despite drop in the value of oil, what with sterling weakening fuel is still more expensive for wholesalers to buy and sell.