Oil price drop prompts calls for action on UK fuel duty

haulage industry blames taxes, not profiteering by oil companies

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Oil prices fell sharply yesterday, after a record one-day rise in the previous session, depressed by doubts over an American plan to rescue the financial sector.

US crude for November was down $2.76 to $106.61 a barrel after rising nearly $7 on Monday. In the UK, the November oil price was down $2.96 at $103.08.

The October contract for US crude had surged as much as $25 to $130 a barrel on Monday before falling back to settle up $16.37 at $120.92.

Prices surged as investors fled to oil amid unease about whether the $700billion plan to buy bad mortgage debt would stabilise the financial system.

It will rescue financial firms from hundreds of billions of debt that plummeted in value when housing prices began to fall in 2006.

The Treasury Department’s first draft said only mortgage-related assets would be purchased. But in a later version, the Treasury secretary asked for the power to expand purchases to troubled assets beyond real estate.

That could leave taxpayers picking up the tab on things like bad car loans and credit card debt.

UK motorists will be hoping Monday’s upward trend in oil prices does not continue after a rare period of falling prices in recent days.

Last week saw a brief price war develop between the major retailers as they moved to cut prices in the wake of two months of oil price declines.

Average prices over the weekend across the UK were 112.8p for a litre of unleaded, and 124.2p for diesel, according to the AA.

The RAC and the Freight Transport Association (FTA) both called on the UK Government to take action over rising fuel prices.

RAC motoring strategist Adrian Tink said: “Using fuel duty as a price stabiliser is a way for the government to really ease the pain at the pumps for Britain’s put-upon motorists.

“The government may argue that they’ll lose revenue if they take this course of action. However the increase in funds they receive from VAT should be ample compensation.”

The RAC said it would also like to see the government set fuel price limits so the motorist can be sure prices stay consistent wherever they may be in the UK.

Mr Tink went on: “The average price of fuel is around 10p higher on motorway service stations than it is in the cities. On top of that, rural communities are also hit by higher prices. This is a very unfair situation and we would like to see the government taking some action.”

struggling

FTA chief economist Simon Chapman said: “Our concern is not about oil company profiteering. The prices paid by operators are in line with world commodity prices for diesel and gas oil.

“But our frustration is with the government, which, although it wrings its hands about UK industry struggling at a time of economic recession, does absolutely nothing about it.”

He went on: “UK road transport operators, consuming substantial quantities of diesel in the process of delivering the UK economy, are getting the worst of all worlds at the moment when it comes to fuel prices.

“In addition to the price premium for diesel, sterling has lost value against the US dollar, making UK fuel prices more expensive. Elsewhere in Europe, member states tax diesel at a lower rate than petrol. Instead we have parity of duty between diesel and petrol, with the diesel duty rate of 50p a litre double the European average.”