Chancellor Rishi Sunak is reported to be eying a cut to fuel duty but there have also been calls for Britain’s petrol stations to become regulated as petrol pump prices add to the squeeze on household incomes.
The Treasury could cut fuel duty by 5p per litre, according to reports over the weekend.
Sunak told BBC TV: “We recognise the importance of people being able to fill their cars up, and that not being prohibitively expensive.”
Amid an energy crisis following Russia's invasion of Ukraine, a litre of unleaded petrol has risen to more than £1.65 on average, with fuel duty fixed at 58p a litre and VAT now almost 28p per litre.
Before any proposed cut, filling up a 55-litre petrol tank would give the government £47.30 of tax, with a 5p cut reducing this only to £44.00.
With the rise in petrol prices from £1.20 a year ago, the extra VAT is estimated to be roughly £2.7bn in the last 12 months on an annualised basis.
Retailers have been making as much as £5mln a day from higher than normal profit margins, the RAC said recently.
Such a cut would be a “drop in the ocean” said Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, and “isn’t going to be enough to stop people from having to make very difficult decisions about how and where they travel in future”.
What’s more, petrol station suppliers are exploiting drivers by being slow to lower prices when oil prices decline, according to campaigning group FairFuelUK, which has called for regulation of the sector.
“The exploitation of drivers is running even more rampant, with businesses shameless without any compunction using the Ukrainian Conflict to line their pockets,” said FairFuelUK’s Howard Cox.
“There has to be transparency in the way petrol and diesel prices are reached,” he said, when crude oil prices and exchange rates fluctuate.
“If gas, electricity, water and telecoms get price protection bodies, why shouldn’t motorists have one too?” he said, calling for a regulator “to ensure pricing fairness for both consumers and hardworking fuel retailers too”.
“Most of the profiteering is at wholesale level not by small independent retailers, who are also victims of the greedy fuel supply chain.”
From barrel to pump
Once crude oil is extracted from the ground it takes around 12 to 24 hours to process a 30,000-barrel batch, where the crude is heated to boiling point and distilled to separate the liquids and gases, among other processes to meet environmental requirements.
Distributors hold, ship and truck the refined fuel around the world, with timeframes varying from one day to three weeks.
While energy prices have shot up, actual supply levels of oil and gas are reportedly little changed so far.