THE CLAIM: THE SHOCK RISE IN SUPPLEMENTARY TAXES FOR OIL FIRMS FROM 20 TO 32 PER CENT WILL MAKE PETROL PRICES AT THE PUMPS RISE
The chancellor said he will pay for a new fuel price stabiliser and 1p fuel tax cut with a massive hike for companies producing oil in the UK – from the previous 20 per cent up to 32 per cent from midnight yesterday.
Will motorists feel the benefit of the new tax scheme, or will oil firms simply pass the extra cost on at the pumps?
THE OIL MARKET
“The oil market is international, and the producer doesn’t set the price – the buyer does,” Ernst & Young’s energy tax expert Derek Leith told City A.M. “Only an organisation like OPEC or a large oil-rich nation like Saudi Arabia can have any influence on the price, or a surprise event like what’s happening in Libya.”
North Sea oil companies don’t produce fuel in nearly enough quantities to influence movements in the wholesale price of oil. Indeed, even if they threaten to halt production altogether in protest, the overall market is unlikely to suffer a big hit.
Firms like BP, which have stakes in every part of the oil business from the first exploration, to refineries, to the garage forecourt, still face stiff competition from the supermarkets when it comes to selling petrol.
George Osborne has also pledged to watch firms “like a hawk”?to prevent any furtive price hikes.
RMI Petrol, the trade body that represents almost 6,000 petrol forecourts in the UK, said the combination of the 1p fuel duty cut and the cancellation of the planned 5p inflation-linked rise will take effect at the pumps within a few days. However, it adds that the soaring price of oil has already added 2p to the wholesale price of unleaded petrol this week.
MOTORISTS WON’T FEEL THE PINCH BUT MIGHT BE HIT BY OTHER RISES
The global oil market means a tax in the UK won’t affect the market price of fuel and therefore petrol. However, the chancellor can do little to prevent events in the Middle East continuing to pressure petrol prices.