The £1m question… Will the UK Government step in and lower the price of oil?

Rising fuel prices are responsible for rising living standards. Demonstrations across the country are demanding government action.

In this article, we look at what can be done to help UK motorists who rely on being on the road. A question that concerns many car owners is: how can he climb?

Oil Prices in 2022

The average price The price of a liter of petrol in the UK jumped from 174.8p to 191.4p last month, the biggest increase since records began in 2000. The increase has added £9 to the cost of filling a 55-litre car.

As we know, prices are not just rising in the UK. They are increasing all over the world. The main reason is that gasoline is becoming harder to find as companies cut ties with Russia after the invasion of Ukraine.

Oil prices were already high in Russia before the Ukraine crisis, but the war has exacerbated the situation. Russia was the second largest exporter of crude oil, behind only Saudi Arabia.

However, the war did not lead to an increase in inflation. As reported in previous articles on The Plan Blog, retailers have been accused of being quick to raise their prices when prices rise and less likely to lower them when prices fall. This is said to be the main reason why the price of petrol at the pump is not always reflective of international price movements.

Trading prices are driven by a variety of variable and fixed factors. These include the international price of crude oil, supply and demand, oil refinery production, the exchange rate between the pound and the dollar, oil distribution fees and government-sponsored oil services.

The RAC has publicly criticized retailers for failing to keep prices low for customers. High prices can make permanent cars unaffordable for low-income families. This could only damage the UK economy in the long run; surely something must be done?

UK Unleaded Petrol Price Breakdown

In short, the cost per liter of petrol is calculated as follows:

1) Retail Price 45% – determined by the price of a barrel of oil. Oil is sold in US dollars so the pound strength is very important.
2) Biofuel 7% – the cost of producing fuel that does not harm the environment
3) 6% Sales Profit – RAC estimates retailers who cut costs take from garages and supermarkets
4) Shipping and distribution fee 1% – paid for taking fuel from A to B
5) Fuel duty 28% – government tax on fuel
6) VAT 20% – added on top of sales taxes

Will the Government take action?

Reducing the problem will require more than just sticking to ‘big fat’; it has been widely reported that people are now reducing their use of cars in order to reduce their expenses. Some say they have quit their jobs because of the high cost of cars. It is very difficult for people who work full time and have families to feed.

Jamie Wiseman, a 31-year-old mechanic from Scotland, believes the responsibility lies with the government to keep petrol prices stable. Wiseman was responsible for creating the Facebook group “Stand up to Fuel Prices UK Wide” at the beginning of last month. Within days, 20,000 people joined his work on Facebook.

Wiseman then created an event on his website, calling for protests across the country. About 58,000 joined. This led to the closure of highways and motorways across the country on Monday.

The figures show a similar trend in oil prices in the late 2000s, under Tony Blair’s government. “It’s been tough emotionally, but we’re hoping it’s going to be okay,” Wiseman told the Times. A Scottish business owner says protests will continue until the government tackles the problem.

Despite the overwhelming reason to support Wiseman’s campaign, industry and political figures have shown little interest or action. The employee fears that more needs to be done. “The price of oil did not go down, so it did not have an effect. Therefore, there will be many protests. I think it has to be big before the government realizes it. Wiseman replied.

What is Really Being Done?

The government has reduced the price of petrol and diesel by 5 pence per liter in the UK for 12 months, which will come into effect from March 23, 2022. passed through the transport costs.

Business Secretary Kwasi Kwarteng has told petrol bosses that competition regulators are reviewing the situation. Retailers have argued that their costs have been rising, with the Petrol Retailers Association saying the limits are: ‘often insufficient to cover operating costs.’

It is also unacceptable that different areas even within the same market have very different prices. Kwarteng says regulators will not hesitate to use their powers against oil refineries if there is evidence that they are violating competition or procurement laws.

However, the breakdown of unleaded petrol prices shown above shows that the Treasury takes almost half of what you pay at the pump per liter through VAT and fuel duty. With the Chancellor’s VAT bill increasing in line with rising fuel prices, would a reduction in the rate of charge be the best way to reduce costs for consumers and prevent the problems that are holding back UK economic growth?

Although the reduction in oil prices, and the words of the business secretary are encouraging, it is necessary to act soon. With the Conservative Party facing its own leadership battle the prospect of action seems unlikely.

Front runner Penny Mordaunt impressed with her promise to cut VAT on fuel in half, from 20% to 10%. However, he was voted out in the final vote by Tory MPs. It remains to be seen what the two finalists Rishi Sunak and Liz Truss will do if they succeed in their bid to become the next Prime Minister.

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