Cardiac Arrest On The Forecourt

Change like cutting fuel tax back to 80s levels

This afternoon Tyler suffered a cardiac arrest on the forecourt. A credit cardiac arrest. For the first time ever, the price of filling his fired up gas guzzling Quattro topped 80 quid.

80 friggin quid!

Tyler can still remember being shocked when the Iran Iraq War sent the price of a gallon soaring to the exhorbitant level of £1. But that's a dream compared to today's all-time record price of £5.46 per gallon.

Fuel prices have now reached record highs. Is the problem greedy oil barons and speculators, as Bishop Snow preaches, or our hippy eco-wibbling government?

Here's a chart based on the official price series from the Department of Energy and Climate Change. It shows the pump price of unleaded petrol, and the amount accounted for by tax (duty and VAT):

The impact of tax jumps right out: of today's average £1.20 per litre pump price, just 42 pence actually pays for the petrol. The other 78 pence (65%) is duty and VAT, going to the government. Which means that of Tyler's 80 quid, a staggering £52 went to the government. Or to put it another way, without tax, Tyler could have filled up for £28.

So we can be quite clear - when it comes to the level of pump prices, it's the government that's squarely to blame.

However, when it comes to the 28% increase in pump prices over the last 12 months, it turns out that tax only accounts for just over one-third of it (despite the 2.5% hike in VAT and this week's increase in fuel duty). The rest is down to market fluctuations.

Driven by the realisation that the Far East is still growing, and commodity hungry, the dollar price of crude oil is up two-thirds over the past year:

Which brings us back to sterling. Oil is priced in US dollars, and as sterling gets weaker against the dollar, our forecourt prices automatically rise.

As it happens, sterling is a little higher against the US dollar over 12 months, but it's still down a whacking 25% since 2007. And unless we tackle our fiscal problems with convincing determination, sterling will soon be heading down again.

At which point, you'll get a load of old timers like Tyler saying "I remember when we could afford to run motorcars. Why, petrol was only £1.20 a litre".

So take this as a warning.

And fill up tomorrow.

Oh, and if you find a candidate who doesn't subscribe to the eco-wibbling idea that fuel taxes should be increased for ever, you might let me know.