Pump prices may currently be in the news for the right reasons – with prices dropping consistently for several months. However, fuel companies are failing to pass on most of the drop in wholesale oil prices to consumers, claims chief secretary to the Treasury, Danny Alexander.
The secretary is urging oil companies to share the savings they have experienced with motorists, following a drop in wholesale oil prices of around a quarter since June; while a barrel of oil cost around $115 (£72) back in June, this now stands at just $84 (£53).
Despite the huge fall in oil prices, drivers have only seen a fall of around six per cent over the same period – from a high of approximately 131.7p per litre to 124.22p – around a quarter of the actual price change, reports the BBC. Meanwhile diesel costs have dropped from an average of 136.37p per litre to 128.58p.
The public have a suspicion that when the price of oil rises, pump prices go up like a rocket. But when the price of oil falls, pump prices drift down like a feather.
Mr Alexander is expected to demand assurances from industry that price cuts will be shared with motorists. He is to use a speech to The Energy Institute in Aberdeen to reiterate that people would “rightly be angry” if prices were not dropping as much as they should do.
"I believe it's called the rocket and feather effect. The public have a suspicion that when the price of oil rises, pump prices go up like a rocket. But when the price of oil falls, pump prices drift down like a feather," Mr Alexander is expected to say.
Helping to limit the extent of cuts passed on to consumers, oil is traded in dollars, and the pound has fallen by 6.9 per cent against the US currency since the middle of summer.
Despite government criticism of high prices, a huge proportion of fuel costs go straight to the government – at around 65 per cent, claims the AA. In addition to 20 per cent VAT, the government charges 57.95p per litre in fuel duty, begging the question why the government doesn’t alter its punitive fuel taxation percentages if it seeks to lower fuel prices, when it so strongly criticises industry for exploiting consumers’ wallets.
Picture: Dave Radcliffe