Fuel prices high because of tax

Article Chris Ebbs
Jan 31, 2013
UK petrol prices are high because of taxes

OFT fuel report blames rises in tax and oil prices for high fuel prices.

The massive rises in petrol and diesel prices over the past 10 years is due to increases in tax and crude oil prices, not a lack of competition, according to the Office of Fair Trading (OFT).

After a five-month investigation, which started in September 2012, the OFT has found that competition between fuel retailers is working relatively well.

Following its findings, the OFT has said that it will not be launching a full investigation. “There are some issues, but nothing big enough to go forward with a further inquiry,” a spokesman from the OFT told Auto Express.

The organisation also said that while some independent forecourts have found it difficult to compete with large supermarkets, the lower fuel prices at supermarket sites help to improve competition and lower costs for consumers.

However, the AA claimed that the investigation was a missed opportunity. “One of the simple things that needed to happen here was to make the wholesale prices of fuel transparent and available to consumers," a spokesman explained.  “This would allow consumers to see how these are reflected at the pump.”

“We kind of anticipated this result. Okay, so there is nothing wrong in terms of competition, but it's still dysfunctional,” he added.

One of the few concrete suggestions to come from the report was that greater transparency was needed on the high prices of motorway service stations. To tackle this, the OFT is calling on the Department for Transport (DfT) to consider the costs and benefits of road signs to display fuel prices at these sites.

It also claims it won’t rule out taking action in local markets if there is evidence of anti-competitive behaviour.

According to the report, the UK has some of the lowest fuel prices in Europe, before tax. However, after tax, the cost of diesel and petrol in the UK becomes, on average, the highest in Europe. Petrol costs increased by 60p per litre (ppl) to 136 ppl between 2003 and 2012, while diesel prices went up from 78ppl to 142ppl.

Robert Oxley, from the TaxPayers’ Alliance, said: “This report vindicates what we’ve been saying all along. The focus has to be on the government now. They’ve frozen and postponed fuel duty, but need to go further.”

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