Yahoo Finance Why am I paying £100 to fill up my tank?
Petrol and diesel prices in the UK have soared – but exactly what makes up these high prices and why are they rising?
Driving a car has never cost so much with the price of petrol hitting an all-time high this week of more than £1.40 a litre – and there was no reprieve for hard-pressed motorists in the Budget.
The cost of petrol now averages 140.20p a litre, with diesel at 146.72p a litre. And in August, another rise will add 3.62p a litre, meaning the typical 50-litre petrol refill will cost £1.81 more, the AA calculates.
However, petrol hasn’t always been this pricey. Five years ago it was just 89p for a litre of unleaded – and even in May 2009 the price was below £1 a litre, according to comparison site PetrolPrices.com.
It now cost drivers more than £68 to fill up a 50-litre tank – £3.45 more than it cost a year ago £12.30 more than in 2010. Meanwhile, larger cars and vans cost up to £100 a tank, says the AA.
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What makes up the price of petrol?
According to Whatprice.co.uk, the forecourt price makes up just 5% of the total cost of petrol, while the cost of oil amounts to a further 32% - but of course it’s taxation that eats up the largest chunk, at a hefty 63% of the price you pay to fill up your car.
At 139.67p a litre, the cost of a litre of petrol breaks down into: 57.95p fuel duty, 23.28p VAT, 52p wholesale, 1.5p biofuel content – with just 4.94p the retailer’s margin and transport costs.
Conor Faughnan, director of policy for the AA, is urging the Government to look at the impact of rising taxes on fuel costs, with no sign of these abating.
“Ratcheting up taxes on fuels, which has been Government policy since October 2008, would be a bad idea for most countries but even more so for us given our dependency,” he said. However, this week saw a “Budget Blow-Out”, with the decision to press ahead with the fuel increase in August.
"The hardship imposed on the consumer and on family budgets ... is extremely serious. We get calls and emails daily from people in near despair because of it. But it is also doing considerable damage to the economy,” He added.
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What are the prime drivers of the rising price?
Aside from rising taxation in recent years, a combination of oil price rises and turmoil in the Middle East is behind price hikes.
Signs of an improving US economy are also a factor in driving oil prices to post-recession highs. Brent crude, which is used as a benchmark for petrol prices in Europe, has been as high $128 a barrel - its highest level since the financial crisis brought the price crashing down in 2008.
However, Phill Jones, commercial director of Motors.co.uk says that while there are major issues around inflating oil prices, the Government “needs to avoid compounding the issue further with additional tax rises – although they failed to do this in the Budget”.
Meanwhile, the he RMI group of 6,000 independent fuel retailers, warned that a further 4.5p rise could be on the way even sooner – with the price of petrol reaching 142p and diesel 150p as soon as Easter.
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Brian Madderson, who leads the RMI petrol organisation, said: "The weakening of the pound against the dollar, the stand-off with Iran, and the financial trouble at refineries such as Coryton are all causing major problems. The prospects don’t look great.”
Not only is the rapid rise in the price of fuel causing problems for the economy, but last month it saw a 20% increase in call-outs to motorists stranded in cars with empty tanks. In February this year, the RAC says that it received 4,780 calls from drivers who had run out of petrol, up from 3,900 a year earlier.
David Bizley, from the RAC, puts the rise down to “motorists trying to drive on empty” because of the cost of filling up.
What do people pay elsewhere?
Considering the UK, Yorkshire and Humberside are the cheapest regions for petrol, at 137.9p a litre, while Northern Ireland remains the most expensive at 139.2p.
If you’re going further afield into Europe, Spain is one of the cheapest countries, according to the AA. There, petrol is 120.06p a litre while diesel is 115.05p – and the lower prices are down to rock-bottom tax rates compared to the UK. Meanwhile, in Estonia motorists pay 107.47p for a litre of petrol, while diesel is 113.30p.
“A lot of European countries have lower taxes on petrol - and diesel in particular, which is incentivised for environmental reasons,” explains a spokesman for the AA. “This is considered a quick-fix for lowering levels of CO2.”
However bad things are in the UK, be glad you’re not in Norway where petrol costs a wallet-crunching 164.28p a litre and diesel at 153.25p.
Meanwhile, petrol in most US states is around 60p a litre – but this is expected to rise given the pressure on oil.
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