OFT Fuel Report Fails Small Businesses

This week the Office of Fair Trading (OFT) released a report giving its assessment of fuel prices in the UK.

The report UK petrol and diesel sector – Call for information UK petrol and diesel sector - Call for information (1.6Mb PDF) said that increases in fuel were caused mostly by higher crude oil prices and rises in tax and fuel duty.

Issues with fuel prices were not due to a lack of competition, the OFT reported.

Before tax, the UK apparently has some of the cheapest fuel prices in Europe. However, this is of little comfort to business motorists who should be aware that, post-tax, the UK’s fuel prices are some of the most expensive.

Of the 27 countries listed in the OFT report, pre-tax, the UK ranks seventh in Europe for cheap fuel at just under 70 Euro cents a litre.

With the tax and duty added, the UK becomes the seventh most expensive of the 27 countries.

With diesel, it’s a similar picture, with the United Kingdom having the 5th cheapest pre-tax diesel. After tax, the UK’s diesel is the most expensive in Europe.

Competition

The margins made by refiners, wholesalers and retailers do not appear to have contributed to pump prices as much as the tax and duty, but that will not help Britain’s hard-pressed motorists.

The OFT found that in areas where there are an abundance of petrol stations, prices are quite competitive. However, in rural areas, where stations may be few and far between, prices can be higher, by as much as 6 or 7p per litre, as was reported on the BBC News.

The OFT did note that a lack of pricing information on motorways was a concern and that it did not rule out taking action if there was credible evidence of anti-competitive behaviour.

Alex Jackman, head of policy at the Forum of Private Business, said of the report:

"That we have some of the lowest pre-tax prices for petrol in Europe will come as little comfort to businesses who are paying a premium at the pumps. The problem of the overall price of petrol would seem to lie squarely in the tax take, and this Government, along with previous ones, continues to ignore this most pressing of issues for business. Our own research has previously shown this to be one of the biggest costs for our members."

Geoff Dunning, Chief Executive of the road Haulage Association, went a step further, calling the report a "whitewash":

“To hear that the OFT does not consider the disparity between barrel and pump price warrants further investigation will come as a real blow to every user of road fuel in the UK.”

“The OFT also acknowledges that high pump prices are a result of high crude prices, not competition. On that basis, why, when the barrel price drops, is that drop is not reflected at the pump?”

Corin Taylor, senior economic adviser at the Institute of Directors (IoD), also picked up on the low pre-tax, high post-tax figures, saying:

“The UK has some of the lowest pre-tax fuel prices in Europe, but some of the highest after tax, making it painfully expensive for companies to move goods around our road network, and for their staff to get to work.”

“The Government can do little to control crude oil prices, but with VAT and fuel duty making up 60% of prices at the pump, it does have the power to reduce the cost of fuel for hauliers, businesses and all drivers across the country.”

Treasury Chief Secretary, Danny Alexander, has already introduced a 5p discount per litre on fuel in the inner and Outer Hebrides, the Northern Isles and Isles of Scilly. There is the possibility that this fuel duty cut could be applied to other remote and rural areas where fuel has been as high as 140p per litre.

Dunning added:

“The RHA, together with FairFuelUK, has worked hard to raise this issue with Westminster in general and HM Treasury in particular. We considered the response from Chief Treasury Secretary Danny Alexander to be particularly encouraging.”

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