Tax upon tax with Fuel !

Most people are aware of the general duty increases for petrol, diesel and other fuel oils as a result of previous budget announcements. However, fewer purchasers are aware of the triple whammy for road fuels implemented from 1^st April.  Not only is the standard rate of duty increasing, but the Chancellor is also withdrawing the reduced rate of duty for bio-fuels. At the same time, fuel suppliers are being required to supply a minimum percentage of bio-fuels product as part of their total supply. If they do not, they will be “fined” a penalistic value for each litre they supply of mineral oil product above the maximum percentage allowed.

The consequences are that:

1/ The net cost of the bio element in mixes (for eg, normal pump diesel already includes up to 5% bio) is increasingly dramatically, as a result of the reduced duty rate being withdrawn, and,

2/ The wholesale costs of the bio elements (known as FAME in the trade) are rising faster than mineral based fuels, because the legislation requiring the minimum percentage is European wide, and market traders are taking advantage of a possible supply shortage.

Fuel oil suppliers are being very cagey on the final impact on prices, but based on wholesale market prices at the beginning of March, the combined effect of market rates plus duty subsidy removal willequate to an additional 1.5 pence per litre on pump prices over the official duty increase due on 1^st April.

General market commentary is fairly unanimous that fuel oil prices will rise significantly anyway this year, as the far-eastern economies begin further economic growth. Combined with all the legislative and duty changes on the 1^st April, we can look forward to fuel costs being significantly higher by the year end.

Mitigation measures, whether through technology, modifiying driver behavious, or smarter purchasing will no doubt become of greater priority as the increase bite !

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