Cut fuel duty NOW, say retailers in crisis talks

Treasury Minister will face demands to help families as crude price drops

PETROL retailers will meet Treasury Minister Priti Patel on Tuesday to demand an immediate cut in fuel duty as the only way to trigger further falls in prices at the pumps.

Brian Madderson, chairman of the Petrol Retailers Association, said that while the plunging price of oil had pushed down petrol prices, fuel taxes were now at near unsustainable levels.

He said: ‘The Chancellor is calling for the benefits of low oil prices to be passed on to hard-pressed families, but at £1 a litre the Government will be taking 75p in tax. We are urging the Treasury to cut fuel duty.

‘Treasury Minister Priti Patel has invited me to go in and talk to her. This will be right at the top of the agenda.’

Madderson said the Government has been benefiting from an unexpected increase in petrol sales over the past year.

‘Fuel sales increased last year for the first time since 2008 and that’s contrary to everything that Ministers told us to expect,’ he said. ‘That means the Treasury has had an unexpected £400million windfall from fuel taxes and a cut in duty would be a way of giving something back to consumers.’

The cost of living will be a key battleground in the forthcoming Election after Labour leader Ed Miliband promised to freeze energy bills if elected.

Chancellor George Osborne said last week it was ‘vital’ that petrol retailers, airlines and utilities passed on the benefits of the low cost of oil to consumers. He also said the Treasury would be launching an investigation into how companies had behaved as oil prices fell.

The price of crude oil has fallen by more than 50 per cent over the past six months to about $50 a barrel. This is because of a reduction in demand from China combined with a glut in supply following soaring US production from ‘fracking’ oil – forcing it out of rock – and the refusal of Saudi Arabia to back a cut in production for Opec, the cartel of mainly Middle Eastern oil producing countries.

Opec is sticking to its 30million barrels of oil a day production limit as Saudi Arabia defends its market share from cheaper US producers,

though other Opec countries are growing increasingly impatient as a result.

The Government has demanded that petrol retailers pass on the fall in costs swiftly to consumers and petrol now averages about 110p per litre.

However, while the wholesale price of fuel accounts for about 20-25 per cent of a litre of fuel at current prices, fuel duty is 57.95p a litre, while VAT is charged at 20 per cent, so retailers would face a sharp squeeze on profit margins to cut prices at the pumps any further, unless oil prices continue to fall.

Madderson said oil would have to fall to $40 a barrel for petrol to drop as low as £1 a litre. The UK has the second-highest petrol duty in Europe after Sweden.

A Treasury spokesman said: ‘We have frozen fuel duty for the remainder of this Parliament, resulting in the longest duty freeze in over 20 years.

‘Due to the Government’s action on fuel duty since 2011, pump prices will be nearly 18p per litre lower by the end of this Parliament than they would have been under previous plans, saving the typical motorist £10 every time they fill up their tank. Pump prices are falling, but it’s vital that the benefits of falls in the price of oil are passed on to consumers as quickly as possible.’

Meanwhile, Energy UK, the trade association for the gas and electricity industry, said consumers could reap the benefits of falling prices by switching suppliers.