The sparks flew last month as Justine Greening, MP, via an interview in The Sun newspaper, warned oil companies and fuel retailers, to ’pass on price cuts’ or face government action. The newspaper report said Transport Secretary Justine Greening had ordered officials to draw up a code of conduct in order to shame retailers out of over-charging, which she would enforce unless companies start delivering cheaper fuel "in days". The Sun said Ms Greening’s department was also devising a new price register so consumers could go online to find the cheapest petrol and diesel and see who was ripping them off.
The Cabinet minister was quoted as saying: "Petrol prices go up instantly when wholesale prices rise, but when wholesale prices fall it can take weeks for them to come down again. It is indefensible that motorists should be ripped off. It’s time the big companies started playing fair with the motorist, so I am giving them one last chance."
RMI Petrol was incensed not just at the way this message was delivered as much as the message itself. Chairman Brian Madderson was spitting feathers, and immediately made clear to the relevant government department that he was always readily available to talk to: "No one has spoken to me. This is a political soundbite and is misleading and damaging for forecourt retailers. I believe recent press reports have prompted the government to opportunistically deflect criticism of the impending 3.02ppl duty rise on August 1 by heaping blame on retailers."
He said suggestions that the falling price of crude oil (US$/barrel) and wholesale price movements on the continent (Eu/litre) should dictate further pump price cuts across the UK by independent forecourt operators is damaging to what is a struggling sector, and showed a lack of any real understanding of fuel price mechanisms: "It is appalling that the government has failed to engage with the fuel retailing industry before issuing misleading information for short-term political expediencey. They are clearly irritated by continuing and justified media and public criticism of their unflinching stance on the planned fuel duty increase this summer.
"While crude oil price in US dollars has significance over time, it is the daily Rotterdam market-based Platts US/$ per tonne price which is converted into pence per litre that influences UK pump prices. RMI’s Big Oil wholesale price assessment system shows that petrol has fallen by 8.436ppl from the end of March to the present day, while the Experian Catalist UK average retail price for petrol has fallen from a peak of 142.48ppl on April 16 to 135.17ppl on May 28 a reduction of 7.31ppl.
"At more or less the same time, Big Oil recorded that the wholesale price of diesel fell by 5.92ppl, while the Experian Catalist average reduced from a peak of 147.93ppl on April 12 to 140.90ppl at May 28 a reduction of 7.03ppl.
"Over the past month, the pound sterling has weakened against the US dollar from 1.622 to 1.577, equivalent to nearly a 2ppl impact on the wholesale price to UK independents.
"It can be seen that between these two grades, with sales on independent forecourts now close to a 50:50 share, the retailers have brought pump prices down overall by the full extent of the wholesale reduction.
"Where is the scope for further pump price reduction demanded by government? This episode justifies immediate cancellation of government’s planned duty rise not an unwarranted attack on retailers." The spat blew up within a week of a Parliamentary debate in which Robert Halfon, MP for Harlow, led a call to bring down fuel prices.
"High fuel prices are literally forcing people off the roads," he said. "They have become a poverty trap, crushing businesses and families and they are not working for the government either."
He has launched a petition, asking the government to: pressure oil companies to reduce prices quickly at the pumps; launch a tough investigation by the Office of Fair Trading, to see why market oil prices are so astronomically high; and establish a Royal Commission into petrol and diesel taxes, and how they can be reduced.
"We need everyone to do their bit, to help cut fuel prices for millions of Brits, to get our economy moving again."
During the debate he said families in his contituency spent more on petrol than on food.
"The price of petrol is at an historic, all-time high. In Harlow, it costs more than 140ppl, and that hits the poor twice as hard as the rich. People say the price has come down, but it is a bit like a burglar taking £100 out of your pocket and giving you £5 back."
Halfon believes a solution would be a fair fuel stabiliser that looks at prices at the pump, so that when the international oil price goes up, tax at the pump goes down.
He quoted a report by the Centre for Economics and Business Research which showed that by cutting duty by 2.5ppl would create 175,000 jobs. "The RAC Foundation and the Institute for Fiscal Studies show that revenues from motoring taxes are set to collapse by between £10bn and £13bn a year over the next decade, as people are driven off the roads by economising on fuel. That is why I urge the government to think again... I recognise there is no magic money tree, so to cut prices at the pump the government needs to seriously consider another windfall tax on the oil companies... We also need competitiveness in the oil market."
scrap fuel duty rises, says RAC
l The RAC has called on the government to scrap the planned rise in fuel duty in August at a time when drivers are being hit by record fuel prices and are struggling to cope with the impact of high motoring costs.
l The cost of motoring remains the primary concern for drivers, with 30% of motorists saying it’s their primary concern, and 61% that it’s one of their top five motoring concerns. More than half of drivers have cut down or combined their journeys this year, the majority in order to cut costs.
l Overall, the cost of motoring soared by 14% in 2011, bringing it up to an average of £6,689 or 55.7p per mile to own and run a car. The average motorist drives 9,115 miles a year though company car drivers cover 18,266 miles annually.
l Men drive more than women at 10,240 and 7,921 miles respectively, and those with children drive around 1,330 miles more than those without. While motorists are trying to drive less by combining journeys and reducing the number of non-essential trips, provisional figures from the Department for Transport indicate that the number of miles driven last year actually increased by 0.9% after falling steadily since 2008.
l Motorists are continuing to give up activities by car due to the high cost of motoring. Rural drivers, who have little alternative to the car, continue to suffer in particular from high costs 85% of people who live in the countryside say they would find it very difficult to adjust their lifestyle to being without a car, compared to 69% of urban dwellers.
l While motorists are driving less to save money, the remaining essential journeys they take mean drivers feel more dependent on their cars than previously 31% of motorists feel more dependent on their vehicle than one year ago, and 45% more dependent than five years ago.
l The RAC concludes that a proper mechanism is needed which actively reduces fuel duty in response to rising crude oil prices. It says rising prices themselves would offset any reduction in tax revenue from lower fuel duty as a result of increased tax from VAT and North Sea oil taxes.
Source: RAC Report on Motoring 2012
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