UK 5p fuel duty cut passed on in full, but Exchequer gets 2p extra since Spring Statement

Commenting on recent rises in the price of fuel, Gordon Balmer, executive director of the Petrol Retailers Association, said: “Despite all fuel retailers passing on the 5p cut in fuel duty after the Spring Statement, wholesale fuel prices have continued to rise. This has resulted in a tightening of margins for petrol retailers, while the Exchequer has benefitted from substantially higher VAT receipts.  For every 10p that the price rises, the Chancellor claims back an extra 2p in VAT.

“Since the Spring Statement, fuel retailers have made 0.39p less on every litre of petrol than before the statement.  Our estimate of the net margins made by fuel retailers on a litre of petrol is around 6.0ppl. This is because retailers have to pay for the charges oil companies make for the storage and delivery of fuel to their forecourts and the Development Fuel Obligation (a Government levy to pay for the development of green fuels).  When taking all the costs into account including rising electricity costs and additional labour charges, petrol retailers are operating on extremely tight margins, and at volumes lower than before the pandemic.  They rely on shop sales to make the business work.

“The market for roadside fuels is highly competitive and dynamic. If the Competition and Markets Authority take a closer look at the industry, they will find competition drives down the price to the lowest possible levels.

“Holding down prices artificially would be an anti-competitive move. We would lose retailers and fuel supply from the market.  We would start to see, on a regular basis, the kind of queues at petrol stations that we experienced during last year’s fuel crisis.

“We wrote to the Rt Hon Kwasi Kwarteng on the 18 May to reiterate that we agree that cuts to fuel duty should be passed on; and to reassure him that our members had done so. We also requested a meeting in the interests of total transparency to explain to Ministers and officials how fuel prices work. To date we have not received any response.”