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Fuel duty freeze extends to a decade but pump prices are on the rise

Rishi Sunak has confirmed that fuel duty will be frozen for a tenth consecutive year.

The decision in today’s Budget means the tax paid on petrol and diesel will remain at 57.95p-a-litre, as has been the case since 2011. 

As a result, the tax currently accounts for around 47 per cent of what drivers pay for petrol at the pumps. 

But even without an increase in fuel duty, the RAC is warning today that there is ‘great uncertainty over the future of forecourt prices, with fears of further rises looming large’ as oil spikes.

Fuel duty freeze extended to a decade: Tax paid on petrol and diesel will remain at 57.95p-a-litre, as has been the case since 2011. As a result, the tax currently accounts for around 47% of what drivers pay for petrol at the pumps

The decision has been welcomed by industry insiders and drivers alike as the hold on fuel duty comes as escalating oil prices in recent weeks have pushed forecourt prices higher by around £5 since November. 

Confirming the extension to the fuel duty freeze this afternoon, Mr Sunak said: ‘Right now, to keep the cost of living low, I’m not prepared to increase the cost of a tank of fuel.

‘So the planned increase in fuel duty is also cancelled.’

The Government claims this will ‘cumulatively save the average car driver £1,600 compared to the pre-2010 escalator’. 

The ongoing freeze was widely expected following Boris Johnson’s signalling on Tuesday that the Chancellor would avoid raising the levy on petrol and diesel as he insisted the economic recovery will be ‘powered by White Van Man’. 

Responding to today’s Budget announcement, Brian Madderson, chairman of the Petrol Retailers Association (PRA), said: ‘As the PRA has campaigned heavily against any rises in fuel duty, we naturally welcome the Chancellors decision today. 

‘Fuel duty is a regressive tax on business and livelihoods, so any attempt to increase it would have been entirely counter-productive as the economy gets back on track.

‘It is by no means an over-exaggeration to say our members have kept this country moving during the pandemic and it is right that the Government has recognised that undeniable fact.’

The Chancellor said today he is 'not prepared to increase the cost of a tank of fuel'

The Chancellor said today he is ‘not prepared to increase the cost of a tank of fuel’

Nicholas Lyes, RAC’s head of policy, adds: ‘Drivers will breathe a sigh of relieve that the Chancellor has decided not to ‘rock the fuel duty boat’. 

‘We feared this would only pile further misery on drivers at a time when pump prices are on the rise and many household incomes are being squeezed as a result of the pandemic.

‘Many drivers see their cars as a safe way to carry out essential journeys and believe having access to a vehicle is even more important as a result of the pandemic. If the Chancellor had raised fuel duty, he could have risked choking any economic recovery as it would have led to increased costs for consumers and businesses.’

Not everyone was happy with the decision, though. 

Friends of the Earth’s head of policy Mike Childs described the fuel duty freeze as ‘astonishing’.

He said: ‘No wonder passenger cars’ contribution to the climate crisis has barely fallen in the past decade.

‘The sale of gas-guzzling SUVs are a particular concern, as they have helped drive a rise in average emissions from new cars in the last five years.

‘Rishi Sunak should be doing more to discourage the purchase of these polluting vehicles – such as slapping a significant increase in road tax on them.’ 

The RAC says a freeze on fuel duty won't prevent the cost of petrol and diesel increasing in the coming months

The RAC says a freeze on fuel duty won’t prevent the cost of petrol and diesel increasing in the coming months

Fuel duty freeze won’t stop pump prices spiralling in the coming months, experts warn

The Chancellor’s announcement today will be welcomed by drivers who have in recent months seen fuel prices gather pace – a trend that could reach record highs by next year, industry commentators have warned.   

Increasing oil prices has pushed up costs for motorists at the pump for four consecutive months, including a 3p-a-litre rise in February alone, according to RAC Fuel Watch.

Right now, to keep the cost of living low, I’m not prepared to increase the cost of a tank of fuel 

Rishi Sunak, Chancellor 

This means filling up today is at least £1.70 more expensive than it was at the beginning of the month – and £5 dearer than it was in late 2020. 

By the end of February, motorists were paying an average of 123.38p for petrol – up from 120.22p at the start of the month. Diesel is up to an average of 126.47p, rising from 123.35p on 1 February. 

It means fuel duty currently makes up 47 per cent of each litre of petrol and 46 per cent for diesel.

A full 55-litre fuel tank of unleaded now sets drivers back £67.86 – £4.87 more than it would have cost on 1 November 2020 when petrol was around 9p per litre less expensive. 

A sharp increase in the price of a barrel of oil has driven the rise at forecourts. 

In February alone, oil rocketed by $10 a barrel to $65.83, a price not seen since mid-January 2020. A barrel of oil is now $29 more than it was at the beginning of November. 

Commenting on the rise, RAC fuel spokesman Simon Williams said February was ‘another rough month for drivers at the pumps’ and added that there is ‘great uncertainty over the future of forecourt prices, with fears of further rises looming large’. 

Williams adds: ‘Those using their cars more frequently will have found themselves having to fork out far more in February than they have at any other time during the pandemic.

‘Oil shot up by $10, a barrel price last seen in January 2020, which led to a 3p-a-litre hike on the cost of both petrol and diesel. 

‘The worry now is whether analysts talk of oil reaching $80 by the end of the year will prove accurate. If it does, we could see a litre of unleaded top 130p and diesel 134p.’

The price of a barrel of oil shot up by $10 in February and could rise to $80 by the end of 2021, experts warn

The price of a barrel of oil shot up by $10 in February and could rise to $80 by the end of 2021, experts warn

If oil rises to $100 a barrel – a price that JPMorgan has said is a possibility next year – petrol and diesel could hit records high of 143p and 148p respectively in 2022.

The previous average fuel price highs were seen in April 2012, with unleaded at 142.48p-a-litre and diesel 147.93p. 

Williams adds: ‘Much hinges on what oil producer group OPEC and its allies decide to do at their meeting tomorrow (4 March). 

‘As the build-up of crude from the pandemic is starting to diminish, they are expected to increase output, but the important question is by how much. 

‘There’s a big concern that they won’t release enough supply to soak up the increased global demand as life begins to return to something more like normal, which could cause the price to go up further. If this proves to be the case, drivers will inevitably be hit badly at the pumps.’

Fuel is 5p cheaper in Northern Ireland than UK average 

Supermarkets remain the cheapest locations to top up your fuel tank.

The average price of fuel at the big four supermarkets is 4p-a-litre cheaper at 119.32p for unleaded and 122.24p for diesel after an increase of 2.8p on both fuels during February. 

Asda had the lowest priced petrol and diesel in February at 118.41p and 121.51p, narrowly ahead of Sainsbury’s which was only 0.5p more expensive. 

Looking around the UK regions and nations however, RAC Fuel Watch can reveal a significant retailing anomaly, with prices in Northern Ireland around 5p-a-litre cheaper than the UK average at 118.38p for petrol and 121.92 for diesel. 

The RAC understands this is as a result of fuel being imported from the Republic of Ireland where taxes are lower per litre, coupled with the benefit of sterling being considerably stronger against the Euro than it was two months ago.

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