Why Britain is taking a pounding on petrol
Exchange rates, taxes and infrastructure are to blame for the UK’S fuel price crisis, finds Rachel Millard
‘The Government needs to recognise that the 5p duty cut is a drop in the ocean’
Families driving to France for a holiday this weekend would have paid £1.85 per litre if they filled up at BP’S Whitfield services on the A2, about five miles from Dover ferry station, yesterday afternoon.
Had they waited until the end of the ferry journey, however, they could have filled up for the equivalent of £1.78 – at the Esso station about 20 miles outside of Calais ferry station in Boulogne-sur-mer.
The comparison masks both higher and lower prices on either side of the Channel, but the overall trend is clear: drivers in the UK frequently pay more for fuel than their European counterparts. Britain is coming off worse in the petrol price crisis.
Average prices in the UK are higher than those in 19 EU countries, according to analysis by The Daily Telegraph of weekly fuel price data published by the bloc on Monday.
Fuel bought in Britain is on average less expensive than just eight countries in the bloc, including Greece, Portugal and Sweden.
Average petrol prices in the UK hit £1.78 on Monday, compared with £1.75 in the EU. In Germany, Europe’s largest economy, it came in at £1.70.
Even since then, fuel prices in Britain have climbed more than 5p, with petrol hitting an average of £1.83 per litre and diesel an average of £1.88 per litre on Thursday.
Rising fuel costs are a global problem, following a jump in crude oil prices as the pandemic recovery reawakens demand, and Russia’s war on Ukraine disrupts supply. Limited global refining capacity has also added to the surge in prices at the pumps, with refiners’ margins at record levels.
However, infrastructure, taxes, subsidies, exchange rates – as refined fuel is traded in dollars – and local refining capacity all lead to significant variation between countries in what drivers end up paying.
Infrastructure differs between nations. Luke Bosdet, at the AA, says countries such as France, for instance, have greater pricing transparency, with drivers easily able to access live pump price databases that encourage competition and pushes the costs down.
The pound’s relative weakness against the dollar is also a key factor behind the UK’S relatively higher fuel prices than in the EU.
The UK’S tax take makes a difference: the Government takes 46pc of the price for every litre of petrol and 45pc for every litre of diesel, compared with averages of 45pc and 39pc in the EU respectively. In Germany, the tax take is 49pc from petrol and 40pc from diesel.
With tax stripped out, the UK becomes more competitive against its counterparts, as the 16th rather than ninth most expensive according to data this week.
Drivers in Hong Kong face some of the most expensive prices globally, at £2.39 per litre this week, while those in India get some of the best rates at £1 per litre, according to analysis for The Telegraph by Finder.com.
In Britain, the average cost of a litre of diesel at motorway services passed £2 for the first time ever yesterday, while the price of a tank of petrol crossed the £100 threshold for the first time on Wednesday.
It is a more than 40pc increase on this time last year, with the Government under growing pressure to step in and extend the 5p cut to fuel duty it enacted in March, or provide other help.
“The Government needs to recognise that the 5p duty cut is a drop in the ocean,” says Simon Williams, a spokesman for the RAC.
Meanwhile, in terms of local capacity, both the UK and Europe typically refine a lot of petrol but not enough diesel, making them heavily reliant on imports.
Before Russia’s invasion of Ukraine, Britain typically sourced almost a fifth of its diesel from Russia.
Russian ships have now been banned from UK ports, however, making it harder for diesel from the country to get in, while Moscow’s products are being shunned by Western traders.
The UK said in March that it would ban imports of Russian oil and diesel by the end of the year, adding to the pressure on supplies. The EU agreed on a partial ban at the end of May.
“The market is less optimised than it was and there is more travelling involved, so everything is getting more expensive,” says Steve Sawyer, an expert in oil refining at Facts Global Energy.
Crude oil prices are also continuing to rise. For a Government trying to help the economy recover from the pandemic, the clouds are darkening.
“Rising prices obviously put a squeeze on household budgets, and these are also increased costs for business and that puts a squeeze on businesses,” says Stuart Adam, at the Institute for Fiscal Studies think tank.
“That will in turn feed through to households as businesses pass on their higher costs in the form of higher prices. All of that is contributing to making us worse off.”