Motorists should brace for fuel duty hikes and ‘perma-high’ petrol costs, AA warns

Households, companies and employees face an period of ‘perma-high’ street gas prices, the AA warns.

A trifactor of gas responsibility hikes, commodity worth surges and swollen retailer margins is ready to hit drivers arduous within the pocket.

There are considerations the Labour Authorities is ready to hike gas responsibility – one thing Sir Keir Starmer refused to rule throughout the election marketing campaign.

If the Treasury will increase gas responsibility within the Finances on high of the ‘bloated’ gas retailer margins and already excessive commodity costs, it’s going to ‘lock in and condemn UK households’ to large outlays in the price of fueling and getting on the street, the AA says.

In March 2022, gas responsibility was minimize by 5p. Till then, drivers confronted the worst-ever common petrol pump costs in UK motoring historical past. 

The AA says ‘the 5p gas responsibility minimize was the one redeeming consider three years (to this point) of perma-high street gas costs’.

The gas responsibility slash was a welcomed reduction, after a mix of the pandemic and conflict in Ukraine led to astronomic petrol pricing from late summer season 2021 onwards.

There was only one temporary interval of two months when the typical pump worth of petrol remained under the pre-pandemic file set in April 2012 – when petrol reached 142.48p a litre.

July 2022 noticed an all-time file common petrol excessive of 191.53p a litre.

Many motorists would battle to soak up one other sharp petrol worth hike, with 28 per cent of AA members tied to a set spend when refueling, rising to 40 per cent amongst poorer motorists.

EVs, plug-in hybrids and self-charging hybrids provide an alternate, however regardless of falling public charging off-peak prices and financial savings to be made by charging at residence, the upfront price of recent EV particularly makes going electrical unattainable for lower-income drivers within the close to future.

FairFuelUK campaigned to maintain gas responsibility frozen since 2011 – and the Tories have caught to that promise for the final 14 years.

In March, drivers had been predicted to save lots of £50 this yr and £250 because the 5p minimize was launched, providing motorists a £1 billion tax reduction.

However this reduction will finish if Chancellor Rachel Reeves reverses the gas responsibility minimize within the October Finances.

The Chancellor informed the Home of Commons this week that there is a £22billion black gap within the nation’s funds’ in want of filling.

A gas responsibility hike is anticipated to be one introduced as a way to fill the coffers, as Labour tiptoed across the topic throughout the election marketing campaign. 

Sir Keir Starmer refused to thoroughly rule out a gas responsibility improve, with the Prime Minister reluctant to say whether or not he would proceed this decade-and-a-half development.

Starmer stated he’d supported a freeze ‘each single time it has come up’ however that ‘gas responsibility must be determined funds by funds’.

Main as much as the election, Shadow Secretary of State for Transport Louise Hague informed Auto Specific: ‘On gas responsibility – we wish decrease taxes on working individuals, which is why we have all the time campaigned in opposition to gas responsibility rises on this Parliament.

‘Nothing in our plans requires us to lift any extra cash past measures already introduced.’

What’s inflicting sky-high petrol costs?

A number of components are at play right here.

Oil and commodity gas prices within the 5 years earlier than Covid and the Ukraine conflict, Brent crude oil was $60 a barrel. Now it is $80.

There trade commonplace is for a 1p a litre cost on the pump for each $2-a-barrel change within the worth of oil, which means the $20 improve has led to a £5.50 soar in the price of a filling a typical 55-litre gas tank.

And retailer margins are including greater than a 6p-a-litre improve to the price of petrol.

In its Highway Gas Interim Monitoring Replace final week, the Competitors and Markets Authority reported that ‘petrol retail spreads within the 4 months to June averaged 12.62ppl, which was 2.55ppl decrease than over the earlier 4 months – however nonetheless greater than double the typical of 6.51ppl over 2015-19’.

That 6ppl equates to an additional £3.30 drivers are having to cough up.

Then there’s the triple whammy of a weaker pound. The alternate charges presently means the pound is value lower than $1.3 in comparison with nicely above $1.4 pre-Brexit. As soon as commodity costs are topic to those charges, a motorist is getting stung with one other £1.90 on each tank of petrol.

Luke Bosdet, the AA’s spokesman on pump costs, stated: ‘General, the AA is worried that present excessive costs might be made considerably worse with any hike in gas responsibility in October.

‘Nevertheless, the Finances on 30 October might be pivotal.

‘Within the Spring Finances 2024 it was confirmed that gas responsibility will stay frozen for a 14th consecutive yr – and the then chancellor prolonged the ‘momentary’ 5p-a-litre minimize for an additional 12 months. If the present Chancellor reverses this it’s going to hit drivers, companies, and the financial system arduous.’