Petrol Price Edges Closer to Record High

Petrol and Diesel prices is continuing to edge towards record highs after part of the fuel duty rise was introduced last night at midnight.  The 1p rise in price is the first of three instalments that will be completed in January.

The average price of petrol is likely to hit £1.20 per for the first time, the current record sits at just under £1.20, set in the summer of 2008.  The AA has predicted that the record will be broken over the next few days.

The rise is coming due to the steady increase in the wholesale price that that companies are paying for the fuel, however this has been aided due to the fall in value of the pound as the wholesale price, although relatively high, is nowhere near the price is was when the record was previously set.

The phased increase is planned after the initial plan, to increase the price by 3p today, fell under heavy scrutiny from both the media and motorists. As a compromise, Chancellor Alistair Darling now plans to introduce to further 1p rises at separate intervals.

The average price of petrol before last night’s rise was 117.93p per litre, with Diesel averaging 118.51p.

As well as the rise in fuel duty, a subsidy on biofuel production has also been scrapped. As all conventional fuel has biofuel in it, this is expected to inflate the cost by an additional 0.7p a litre, industry experts say.

The AA's Andrew Howard said, "Where we go from here is difficult to say,

"It depends on how the pound reacts to the general election result and the impact of any tax changes that follow the election."

A year ago, fuel at the pumps was about 30p a litre cheaper. But it has risen steadily since then.

"The things that have really put the cost of petrol up more recently has been the fact that our currency has been weaker against the dollar, and that's actually had a bigger impact than the duty itself," Brendan McLaughlin from price comparison site petrolprices.com said.

"In 2000, the fuel tax was 73.5%. And now, it's running at about 60%. So tax on fuel, as a percentage, is actually lower at the moment."

Consumers buying new cars will also be affected by changes to vehicle excise duty, which were announced in the 2009 Budget and came into effect at the start of the month.

The changes have been made to encourage the purchase of the lowest-emitting cars. So Vehicle Excise Duty (VED) has been scrapped in the first year for cars in the first four bands, A to D.

This equates to a saving of £90 for those buying band D cars, which include some Ford Fiesta and Toyota Auris models for example.

Those buying the most polluting cars will pay substantially more in the first 12 months. VED on a car in band M, such as some Landrover Discoveries and Jaguar XKs, will cost £950 in the first year, more than double the normal rate of £435.

Posted at 02:02PM Apr 01, 2010 by Marc Stenton in The Economy  |  Comments[0]