Soaring oil price could raise cost of petrol to £4 a litre, minister warns
Government desperate to avoid repeat of fuel blockades as senior Lib Dem claims that those on low incomes cannot afford expense of getting to work
Sunday, 6 March 2011
Britain is set to feel the shock effect of rising oil prices, economists warned last night, as a Tory minister raised the prospect of motorists paying £4 a litre at the pumps.
With petrol prices rising to a record high of £1.43 a litre in parts of the country, economists warned of the "rocket and feather effect" that sees retail fuel prices blast upward after a rise in the price of crude oil but drift down only slowly if it falls.
With further unrest across Libya and the Middle East expected to exacerbate the problem, The Independent on Sunday has identified a number of energy firm bosses anticipating a leap in company profits.
Tim Harford, journalist and author of The Undercover Economist, said yesterday: "It's actually when the oil price starts falling that petrol retailers make the most money. When prices start falling, we get very relaxed about it because we know petrol is cheaper than it was last week so we don't look so hard for a deal."
Pressure is mounting on the Government for intervention as the price of Brent crude increased to nearly $103 a barrel on Friday – the second highest figure since the $147 high in 2008. Chancellor George Osborne who gives his second Budget on 23 March, hinted he was preparing to act when he told the Conservative spring forum in Cardiff yesterday that he "heard" the complaints about fuel prices. He said: "I won't take risks with economic stability, or wreck the public finances. But I promise you I am doing everything I can to find a way to help."
The Treasury is weighing up using an unexpected windfall from lower than forecast levels of jobseeker's allowance claimants to ditch the planned 1p rise in fuel duty.
The issue of fuel prices took on an increasingly political dimension this weekend, with warnings about public disquiet and a senior Liberal Democrat telling Mr Osborne that it was a matter of "social justice".
Tim Farron, the Lib Dem party president, said soaring fuel costs were forcing people on low incomes to consider giving up work to avoid travel expense. "This is not just an issue for white van man or Jeremy Clarkson fans. It is an issue of social inclusion and social justice," he said.
Peter Carroll, a spokesman for Fair Fuel UK, warned: "We are being pushed into a fuel price crisis. My reaction to these prices is one of horror, of what it will do to the economy, what it will do to people and what it will do to business."
Significantly, the Lib Dems have withdrawn their opposition to financial assistance for motorists, insisting those still driving have no alternative. "Nobody is choosing not to use their car any more because of petrol prices," Mr Farron said. "If you were able to take that decision, you did that five or six years ago. Now people are making decisions about not working because of the cost of driving."
Philip Hammond, the Transport Secretary, has also made clear to cabinet colleagues that forcing up petrol prices is not the way to persuade people to give up their car. Online campaign groups have been formed calling for lower fuel duty, and ministers are anxious to avoid a repeat of the fuel blockades in 2000.
Alan Duncan, an international aid minister and a former oil trader, will have done little to allay motorists' fears with his grim warning about how high prices could go as a result of unrest in the Middle East. He posited the idea that petrol at the pump could reach £4 a litre and the price of crude could top $200 a barrel. "When I said oil would go through $100, people thought I was bonkers. Now we are not far off $130."
David Cameron has promised the Treasury is still examining proposals for a fuel stabiliser, which would level out prices by reducing duty when oil prices were high and increasing duty when the cost of oil fell.
In a speech yesterday, Ed Balls, the Shadow Chancellor, told Mr Osborne to "get his head out of the sand". "He should be helping hard-pressed families now by immediately reversing the Tory VAT rise on fuel."
Source; http://www.independent.co.uk/news/uk/po ... 33618.html
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Warning over 'fuel price emergency'
6th March 2011
(UKPA) – 6 hours ago
Campaigners have warned of a fuel emergency after the price of a litre of unleaded reached £1.40 at one garage in England.
The BP garage in Kent was charging 140.9 pence per litre, which campaign group Fair Fuel UK said could be the highest price recorded so far.
The forecourt on the M2 near Rainham, Gillingham, was also pictured selling a litre of diesel at 144.9 pence per litre.
Last month, the average UK price for petrol was around 128.65p per litre, with diesel at 133.38p.
Fair Fuel UK spokesman Peter Carroll said: "These prices are shocking.
"My reaction to these prices is one of horror, of what it will do to the economy, what it will do to people and what it will do to business. They will be crushed by this.
"We are being pushed into a fuel price crisis."
The findings on fuel prices come as Chancellor George Osborne delivered a strong hint that a 1p fuel duty hike due next month will be scrapped amid fears over soaring oil prices.
"When it costs £1.30 for a litre of petrol, £80 to fill up a family car, I know people feel squeezed," he said.
Source; Press Association
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Osborne: I’ll help drivers hit by soaring petrol prices
George Osborne, the Chancellor, has vowed to use his forthcoming Budget to help hard-pressed motorists as a fellow minister admitted soaring oil prices could send the cost of petrol to more than £2 a litre.
05 March 2011
Mr Osborne used a speech at the Conservative Spring Conference at Cardiff to reached out to what he called “squeezed” middle and lower-income voters paying £80 to fill up a family car. “I hear you,” he declared.
“I promise you I am doing everything I can to find a way to help.” His comments were the clearest signal yet he will use the Budget, in two-and-a-half weeks’ time, to announce that a planned rise in fuel duty, 1p above the level of inflation and to take effect from 1 April, will be scrapped.
He is likely also to bring in other measures to help motorists such as a fuel duty “escalator” – which would see the amount of duty payable by motorists fall when oil prices are high, and vice versa.
Last week Danny Alexander, the Liberal Democrat Treasury chief secretary, confirmed plans for a cut in duty of 5p in remote and island communities in Britain – a move widely thought to herald more general help for the motorist in the Budget.
Earlier Alan Duncan, the International Development minister, said the crisis gripping Libya and other Arab states was likely to push the cost of crude oil above $200 a barrel – well above the current record price.
A further “worst case” hike, sending oil prices to around £2.50, which would “translate” into British motorists paying £2.03 for a litre of unleaded fuel, more than half as much again as the current high price of £1.30 at the pumps. Mr Duncan said the current level could “look like a luxury” if the situation worsened.
Mr Osborne and David Cameron are uncomfortably aware that “squeezed” middle and lower income voters – the key constituency ahead of the next general election – are particularly badly hit by rises in petrol prices and that events in North Africa could turn what is already growing unrest into the coalition’s most pressing political problem.
Senior ministers privately fear a repeat of the 2000 fuel protests which reduced Tony Blair’s Labour government to panic and saw the Tories, then under William Hague, pull ahead of Labour in the polls for the first time for seven years – although this advantage proved very brief.
Mr Osborne said in his speech: “When it costs £1.30 for a litre of petrol; £80 to fill up a family car, I know people feel squeezed. And I say this to people, I hear you. This April I’m freezing council tax. But we’ve got another of the Labour Party’ pre-prepared rises in petrol tax also coming this April – one penny above inflation.
“I won’t take risks with economic stability, or wreck the public finances. But I promise you I am doing everything I can to find a way to help.”
Labour are calling for the VAT rise on petrol, brought in at the start of the year, to be reversed. Angela Eagle, the shadow Treasury minister, said: “Danny Alexander and George Osborne could and should act now to help motorists in every part of the UK.
“They could immediately reverse their VAT rise on petrol, which has added £1.35 to the cost of filling up a 50 litre tank, and ease the pressure on families across the country right now. In the Budget later this month they should look again at the annual fuel duty rise due in April. The last Labour Government often postponed planned duty increases when world oil prices were on the up – as they are now.”
Mr Duncan, who is a former oil trader with long business experience in the Gulf, disclosed he had been warning his ministerial colleagues since the start of the year about the toxic threat of rising prices.
He said in a newspaper interview: “ I’ve been saying in government for two months that if this does go wrong, £1.30 at the pump could look like a luxury, $200 [a barrel] is on the cards if ... anyone is reckless and foments unrest.”
The worst-case scenario, the minister suggested, was prices nudging $250 a barrel, which would take UK petrol prices over £2 a litre. That would happen if terrorists took advantage of political unrest to bomb oil tankers or oil reserves in the region.
The current record price for a barrel of oil is $147 in a “spike” in 2008. Currently, it is below $120, which has surprised experts given the volatility in the region.
Fuel duty brings the Treasury close to £30 billion a year. Labour claim this year’s VAT rise on fuel will generate around £700m in extra revenue this year and say the increase could be reversed using the £800m extra the Treasury is receiving from the levy on bank balance sheets.
Source; http://www.telegraph.co.uk/motoring/new ... rices.html
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