Forecourt Trader - 30 years at the heart of the fuel retailing community

Refining the cost of fuel

Two major reports in the past month have looked at road fuels and the motoring sector from very different perspectives, but both have highlighted the cost of fuel and taxation.

At one end of the spectrum, the Statistical Review 2013 of the UKPIA (United Kingdom Petroleum Industry Association) covers the fuel market from the point of view of the oil companies, while the RAC Report on Motoring 2013, celebrating the 25th anniversary of this annual publication, is intended to represent the interests of its motorist members.

While the cost of fuel to consumers, and the amount of duty and tax, is highlighted in the UKPIA report, its primary focus is concerns over the security of the refining industry in the UK. Referring to a report by HIS Purvin & Gertz, which was sponsored by UKPIA, it warns that an unsustainable financial burden is being placed on the refining sector and UK refineries could close as a consequence.

HIS Purvin & Gertz calculates £11.4bn will be needed to meet existing UK and EU legislative requirements between 2013-2030, and that the impact of other measures in the pipeline, such as the Fuels Quality Directive and the Energy Efficiency Directive, are still not known.

In an introduction to the UKPIA report, the energy minister Michael Fallon says the government is working with the industry to review the issues affecting it. In his introduction, the UKPIA president Gary Heywood warns "time is not on our side" adding: "We look forward to an early response from Government to the study and also their support for an urgent analysis of EU legislative impacts in 2013 through the legislative 'Fitness Checks' being undertaken at the EU level via the Refining Forum established by the European Commission."

Looking at fuel prices, the report says that the UK had the lowest pre-tax price in Europe for both petrol and diesel in 2012, but the high level of duty meant the price at the pump paid by consumers was the third highest for petrol, and diesel was the most expensive, in Europe.

These high prices combined with the recession have caused an 11% fall in UK road fuel consumption between 2007-2011, but although petrol reflected this trend with a fall of 5% in 2012 compared with the previous year, diesel continued its steady rise of the past 20 years, and was up 2.5% in 2012.

Diesel's popularity was due to its more efficient fuel consumption, with it accounting for more than 59% of the 44 billion litres of road fuels sold in 2012, but the report notes: "However, as petrol engine efficiency improvements continue to catch up with that of diesel, forecasting the current 'dieselisation' trend long term is difficult. Particularly as the growing drive for a reduction in carbon emissions from transport will increasingly result in tax levels becoming more aligned with vehicle carbon emission levels, and most likely lead to a marginal increase in the attraction of smaller capacity gasoline-fuelled vehicles. For these reasons, analysts argue that the growth in diesel's market share will slowly cease and reach a peak in 2017, followed by a gradual reversal in trend."

One fuel that has seen a powerful reversal is LPG. Sales rose rapidly between 2000 and 2006 due to a favourable duty incentive, a conversion grant scheme and favourable treatment under the London Congestion Charge. However, the report states: ""The removal of the grant scheme and gradual reduction in the duty differential between LPG and standard fuels since has impacted on the sales of LPG/petrol cars, which in turn has affected sales of LPG, lowering sales to 185 million litres, down from a 2006 peak of almost 250 million litres."

Biofuels, on the other hand, have been growing due to the UK setting targets for market share of road fuels of 5% by 2010/11 and the EU looking for 10% by 2020. However, the 2010/11 target was not met, with the UK revising its targets to 4.5% for 2012/13 and 4.75% by 2013/14. The problem was that growing crops to produce fuel can raise its own sustainability issues, and this means future targets are under review.

The UKPIA report also notes the dramatic decline in UK filling stations, down from 37,500 in 1970 to 8.608 at the end of 2012. The only section of the retail market that is growing is large supermarket sites, with 1,306 supermarket filling stations (15% of sites in the UK) taking a 41% volume share, with 45% of all petrol sold and 38% of diesel.

The RAC report, looking back over its 25-year history, says the biggest perceived change is the increased cost of motoring, with 61% of motorists saying this is the most noticeable change over the past quarter of a century.

It says cost is the primary concern for nearly half (46%) of drivers, with the cost of fuel a particular worry for those living in rural and suburban areas, and more drivers this year are being forced to curtail their social lives due to the rising cost of motoring (14% this year, compared to 9% in 2012).

However, despite feeling the pinch, motorists are more dependent on their cars than ever before. Nine out of 10 motorists (89%) are more reliant on their cars today than they were 25 years ago and 78% of all drivers agree they would find it very difficult to adjust to a car-free lifestyle.

In a call to action, the RAC says: "The Government's freeze on fuel duty until at least September 2014 is welcome, but it's not enough. The recent study by the National Institute of Economic and Social Research funded by the FairFuelUK campaign has established a clear link between the cost of fuel, economic growth and employment.

"The RAC calls on the Government to take further immediate action to cut fuel duty so as to reduce 'fuel poverty' and stimulate economic growth, create jobs and reduce inflationary pressures. The RAC also calls on the Government to create greater transparency in the price motorists pay at the pump by requiring all receipts issued by filling stations to itemise the cost of the fuel, fuel duty and VAT separately."

Want more stories like this in your inbox?

Sign up for our FREE email newsletter

My Account

You are not logged in.
  • Weekly
    Retail
  • Weekly
    wholesale
  • Daily
    Average
Weekly retail fuel prices: 11 December 2017
RegionDieselLPGSuper ULUL
East123.7065.90130.36121.00
East Midlands123.22132.06120.72
London123.2858.90131.75120.77
North East122.41132.57120.03
North West123.0453.80129.56120.69
Northern Ireland121.86125.50120.15
Scotland123.43130.00120.43
South East123.79130.52121.33
South West123.5451.70130.13120.95
Wales122.8952.90129.42120.12
West Midlands122.72130.53120.53
Yorkshire & Humber122.96133.33120.61

Most read

Are you feeling positive about the opportunities for growing your business in 2018?