Fuel crazy

THIS month the average UK price of unleaded petrol surged past £1 per litre so it costs £61 to fill up a Ford Mondeo . But in some European countries you can fill up for £35, and in the US just £22. Features editor TRACEY SPARLING investigates why we pay so much for petrol in the UK.

AS our report revealed on Friday, East Anglia tops the league for the highest price paid for petrol in the UK - apart from Northern Ireland.

The average cost per litre of unleaded is now at £1.02 in east Anglia (up nearly 4p from October) according to the latest data from industry researcher Catalist , compared with the UK average of £1.01. So it costs £61 to fill up the tank of a Ford Mondeo.

In a world context, the difference is staggering. In Estonia you can fill up for £35, and in the US just £22. The only European places which charge more than the UK are Norway, Belgium and the Netherlands.

Petrol prices have risen sharply on the back of record global oil prices, which have increased as a result of supply concerns and the weak dollar. The weak dollar has driven up oil prices because some investors have been using the commodity as an alternative to holding dollars.

Of course the main reason we pay so much for our petrol in Britain is that the government takes 66 per cent of the cost as tax. Motorists have also been hit by the Chancellor's fuel duty increase of 2p a litre imposed from October 1, and it will rise again in April 2008 and 2009.

Luke Bosdet, spokesman for the AA said tax is the main reason we pay more for petrol than the US and most other places in Europe. He said: “Fuel duty for petrol and diesel is more than 50p a litre, and the government collects VAT on top of that. Fortunately for UK drivers, competition among most supermarkets is so fierce that car fuel prices are lower in built-up areas.”

He said the recent fire at Coryton oil refinery in Essex has helped to accelerate the rate of price rise, but it wasn't the only factor.

Luke said: “Although the fire halved production from the refinery and petrol stations in surrounding areas suffered periodic shortages, the fuel prices in those areas actually improved compared to cheaper regions. Industry commentators are far more scathing on the impact of the Coryton fire, but there are other factors. Suppressed supermarket prices beginning to catch up with other retailers, the price floodgates are opening now that the psychological £1 barrier has been breached, the effects of soaring oil prices are working through to the pumps, and there have been refinery maintenance problems in northern France.”

But did you know petrol in Britain should in fact cost £1.10 a litre? Catalist says that although petrol prices have risen 2.1p on average since July, the price of crude oil and the taxes on petrol have risen far more steeply than the that. The only reason we are not paying £1.10 is because retailers and refiners have accepted a drop in profits.

That's good news for customers, but sadly, this is not a story with a happy ending. Retailers and refiners are not expected to continue to absorb the price rises for long, sparking fears of a massive rise in inflation.

Luke said: “Now that the £1 litre is the norm for most of the country, it is difficult to see what restraints there are on retailers other than local competition. You may remember seeing 99.9p on forecourt boards for quite some time before petrol stations finally posted the £1+ litre. What drivers have to remember is that what matters is not how high the price of fuel goes, but how long it stays high. Oil prices remain well in the $90s and it takes four to six weeks for those prices to work their way through to the pump. It's going to be an expensive winter for drivers.”

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Have you found cheap petrol in Suffolk? Drop us a line at starnews@eveningstar.co.uk.

Norway £64.90

Netherlands £63.02

Belgium £61.43

GB £61.20

Germany £58.81

Italy £57.02

Portugal £56.33

France £55.52

Sweden £55.39

Austria £50.20

Czech republic £46.30

Greece £44.24

Spain £45.31

Switzerland £44.76

Estonia £35

US £22

(prices are based on filling a family car with a 60-litre tank, like a Ford Mondeo, with unleaded petrol).

The price of diesel is only around 37p before taxes, but the East Anglian average price is now £1.06 up nearly 6p from October.

Recent rises have prompted the Road Haulage Association to urge the Chancellor to seriously reconsider any further increases in fuel duty.

"These week-on-week increases are spiralling out of control", said RHA communications manager Kate Gibbs. “For many years UK hauliers have been operating at a financial disadvantage to their foreign counterparts and these continual rises in the price of diesel are just making a bad situation worse. The situation for many operators has now reached a critical point. If the proposed further increase of another 2p per litre goes ahead next spring, many hauliers may be forced out of business, providing even greater opportunities for foreign operators, who already have an unfair advantage, to fill the gap.

"Our haulage industry is one of the largest employers and providers of freight services in the UK. The Chancellor should be giving our hauliers an incentive to carry on, but it seems that British operators are being penalised for trying to do no more than support UK plc."

The RHA calls for a solution to the unfair fuel duty difference between the UK and the rest of the EU. Britain's diesel tax is more than twice that of the rest of the EU and for a typical articulated lorry doing 100,000 miles a year, that means an extra £15,000 in fuel duty.

Even a low-mileage artic is paying £8,000 a year more than European rivals.

The Treasury says that fuel duty is slightly less in real terms now than it was in 1999. But the cost of diesel has risen by more than 50pc and the government charges VAT on that cost, as well as on fuel duty. For every 5p increase in the price, the government takes almost 1p in VAT.