The Price of Fuel

One of the primary methods that I use to come up with ideas for this blog is my twitter feed. Whilst for the moment I am still a bit of a newbie when it comes to social media one issue more than any other dominated my twitter feed over the weekend, the price of fuel. In particular messages from Fair Fuel UK. For those of you who are not familiar with this group, they are a campaign group who push for lower fuel prices at the pumps by pressuring the government to reduce taxation. Their main spokesperson is Quentin Wilson (yes the guy with the receding hairline who used to be on Top Gear with Jeremy Clarkson before it was cool), and they have this week been sounding their own horn as the governments plan to abandon the fuel escalator has apparently added 0.5% to UK GDP.

Ignoring for the moment any environmental concerns about increased traffic on the roads etc (that’s a whole different blog post) this is indubitably good news. The past five years have been tough financially for most of us, so anything that will help improve the economy can only be good news. What intrigues me about this however is their claim that the UK pays the highest fuel duty in the UK. Looking quickly around their website I could find no actual evidence for this claim (I apologise if there is but it wasn’t obvious to me, if anyone wants to Tweet me or post a link me a link please go ahead).

Certainly it has always been my understanding that we pay higher fuel costs than everyone else, just like it has always been my understanding that nothing rhymes with orange, there are fifty states in the USA and that the Germans will always beat us in a penalty shoot out. Apparently the first is only partly true, there are in fact 46 states and 4 commonwealths, but unfortunately the Germans do always beat us in a penalty shoot out. What about fuel prices however, do we pay more than the Europeans?

I remember the fuel protests in 2000 (yes it really was 14 years ago), unleaded petrol cost 80p a litre (according to the AA it is currently around 130p). Back in 2000 tax accounted for an astonishing 81.5% of the price at the pumps. That means the actual physical cost of the petrol was only 14.8p! At the time of the protests the UK had the most expensive fuel in Europe, just seven years previously it had been amongst the cheapest.

In protest at this lorry drivers blockaded refineries and fuel depots and the pumps run dry. I was at school at the time, and actually quite enjoyed it, the roads were eerily quiet and you could quite happily walk down them in rush hour without the threat of being run over. In the end the protests seemingly achieved little and not much actually changed. In fact in the intervening 14 years petrol prices have increased by 62.5%, inflation, as measured by rpi over the same period is at 52.3%. So the price of fuel has only increased further since then.

In fact this is not true, the chart below shows the price of crude oil, in 2000 it was around $30 a barrel, today it is close to $110. In other words the price of crude oil has increased by 266%. This suggests increases in fuel costs may not have been driven by taxation.

Historical Crude Oil Prices - Crude Oil Price History Chart

To further investigate this I looked at the AA fuel price report, the available data goes back to January 2001. At this point for high octane unleaded taxation made up 77% of the cost of fuel. In December 2013 taxation made up 60.8% of the price (for those of you wondering if there was no tax on unleaded it would cost 51p a litre). Although not conclusive this does suggest that things have changed fairly significantly since the blockades of 2000.

The crucial thing I wanted to know however was where do we stand relative to the rest of Europe. Prices are surprisingly difficult to find, however this website does list them. Out of the 21 countries we come out as the seventeenth most expensive for unleaded and nineteenth for diesel. Prices are listed in Euros, the average price for unleaded is €1.48 and the UK is €1.56. The real message is you do not want to go on a driving holiday to Portugal, the Netherlands, Italy or Norway in anything bigger or more thirsty than a Smart car.

So unfortunately we do still pay more for our fuel than most of Europe, although certainly not all of Europe as some suggest. So if fuel prices are still a concern for you I can only suggest that you head over to FairFuelUK.com, where you can sign up to support them, then maybe the UK will drop further down this league table.

I’ll leave you with a final thought however. The US has far lower fuel taxation than us, but this brings its own problems. As evidenced by the chart above the price of oil is very volatile, this can mean that there are dramatic movements percentage wise in the price of fuel. Any major event impacting supply, such as the Gulf War pushes the price of oil up massively, this can have a much larger drag on the economy than in countries where taxation is higher. In higher taxation countries, proportionally the price of fuel goes up less, meaning a smaller impact on the economy. Of course when prices fall the US economy benefits proportionally more than we do, like anything it is swings and roundabouts.

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