Rishi Sunak has confirmed that the fuel tax will be frozen for the tenth consecutive year.
The decision in today’s budget means that the tax paid on gasoline and diesel will remain at 57.95 p-per liter, as it has been since 2011.
As a result, the tax currently accounts for around 47 percent of what drivers pay for gasoline on the pumps.
But even without an increase in fuel tax, the RAC warns today that “there is great uncertainty about the future of forecourt prices and that there are great fears of a further increase than oil spikes”.
Freeze on fuel tax extended to a decade: The tax paid on petrol and diesel will remain at 57.95 per liter, as it has been since 2011. As a result, the tax currently makes around 47% of the gasoline costs for drivers from pumps
The decision has been welcomed by industry insiders and drivers alike as fuel tax has risen by around £ 5 since November due to soaring oil prices in recent weeks.
Mr. Sunak confirmed the extension of the fuel tax freeze this afternoon, saying, “In order to keep the cost of living down, I am currently unwilling to raise the cost of a fuel tank.
“This also means that the planned increase in fuel tax has been repealed.”
The government claims this would “save the average motorist a cumulative pound 1,600 pounds compared to the pre-2010 escalator”.
The Chancellor said today that he was “unwilling to increase the cost of a tank of fuel”.
The prolonged freeze was widely anticipated after Boris Johnson signaled Tuesday that the chancellor would avoid increasing the tax on gasoline and diesel as he insisted that the economic recovery be “White Van Man powered”.
Brian Madderson, Chairman of the Petrol Retailers Association (PRA), responded to today’s budget announcement: “As the PRA has been strongly opposed to a fuel tax hike, we of course welcome today’s decision by the Chancellors.
“The fuel tax is a regressive tax on businesses and livelihoods. Therefore, any attempt to increase it would have been totally counterproductive if the economy had got back on track.
“It is by no means an exaggeration to say that our members kept this country moving during the pandemic, and it is right that the government recognized this undeniable fact.”
Nicholas Lyes, Head of RAC Policy, added: “The drivers will be relieved that the Chancellor has decided not to rock the fuel boat.”
“We feared that this would only add further misery to drivers at a time when pump prices are rising and many household incomes are under pressure as a result of the pandemic.
“Many drivers see their cars as a safe way to make important journeys and believe that having access to a vehicle is even more important as a result of the pandemic. If the Chancellor had increased the fuel tax, he could have risked stifling an economic recovery as it would have increased costs for consumers and businesses. “
The RAC says a fuel tax freeze won’t prevent gasoline and diesel costs from rising in the coming months
The fuel tax freeze won’t hold back pump prices in the coming months, experts warn
Today’s announcement by the Chancellor is welcomed by drivers who have seen fuel prices rise in recent months – a trend that could reach record highs by next year, industry commentators have warned.
RAC Fuel Watch says soaring oil prices have driven the cost of motorists at the pump for four consecutive months, including a 3p per liter increase in February alone.
To keep the cost of living down, I am currently unwilling to increase the cost of a fuel tank
Rishi Sunak, Chancellor
This means that topping up is at least £ 1.70 more expensive today than it was at the beginning of the month – and £ 5 more than it was at the end of 2020.
At the end of February, drivers paid an average of 123.38 pence for gasoline, compared with 120.22 pence at the beginning of the month. Diesel is up to an average of 126.47 pence and increases from 123.35 pence on February 1st.
This means that the fuel tax is currently 47 percent per liter of gasoline and 46 percent for diesel.
A full 55 liter unleaded fuel tank now brings drivers back £ 67.86 – £ 4.87 more than it would have cost on Nov 1, 2020 when gasoline was 9 pence per liter cheaper.
A sharp rise in the price of a barrel of oil drove the rise in the forecourt.
In February alone, the price of oil rose by USD 10 per barrel to USD 65.83, a price that has not been recorded since mid-January 2020. A barrel of oil is now $ 29 more than it was in early November.
Commenting on the surge, RAC fuel spokesman Simon Williams said February was “another tough month for drivers at the pumps”. He added that “there is great uncertainty about the future of forecourt prices and fears of a further increase are great”.
Williams adds, “Those who use their cars more often will have to get out far more often in February than at any other time during the pandemic.
‘Oil rose $ 10, a barrel price last seen in January 2020, causing gasoline and diesel costs to increase 3p per liter.
‘The concern now is whether analysts who say oil will hit $ 80 by the end of the year will prove correct. If so, we could see a liter of unleaded Top 130p and Diesel 134p. ‘
The price of a barrel of oil rose $ 10 in February and could climb to $ 80 by the end of 2021, experts warn
If oil climbs to $ 100 a barrel – a price JPMorgan believed possible next year – gasoline and diesel could hit record highs of 143p and 148p, respectively, in 2022.
The previous average highs in fuel prices were recorded in April 2012, with unleaded at 142.48 p-per liter and diesel at 147.93 p.
Williams adds, “Much depends on what the OPEC oil producing group and its allies decide at their meeting tomorrow (March 4th).
‘As the surge in crude oil gradually declines due to the pandemic, they are expected to increase production, but the important question is by how much.
‘There is a great concern that they will not create enough supply to meet increased global demand as life returns to something normal which could cause the price to continue to rise. If this is the case, the drivers will inevitably be hit hard on the pumps. ‘
Fuel is 5 pence cheaper in Northern Ireland than the UK average
Supermarkets are still the cheapest places to top up your fuel tank.
The average fuel price in the four major supermarkets is 4 pence per liter cheaper at 119.32 pence for unleaded gasoline and 122.24 pence for diesel after both fuels rose 2.8 pence in February.
Asda had the cheapest gasoline and diesel in February at 118.41 pence and 121.51 pence, just ahead of Sainsbury’s, which was only 0.5 pence more expensive.
However, if you look around the regions and countries of the UK, RAC Fuel Watch can find a significant anomaly in retail. Northern Ireland prices are 118.38p for gasoline and 121.92p for diesel, 5p per liter below the UK average.
The RAC believes that fuel is imported from the Republic of Ireland, where taxes per liter are lower, and that the pound is considerably stronger against the euro than it was two months ago.
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