Latest rises mean prices are now as dear as they've ever been – and worse is to come.
Petrol prices have just – in some parts of the UK – hit an all-time record. Pump prices at motorway services and on major A-roads have risen to as much as £1.22 per litre (£5.55 per gallon).
Currently, the average price for unleaded is £1.16 per litre, but drivers can pay as much as £1.27. And the Government has another tax hike scheduled for April 1 that will push up prices by a further 3p per litre in duty and VAT. The rise will add an average £4 to the cost of a tankful, and £20 a month to a typical families’ transport costs.
Motoring groups are now lobbying the Chancellor, Alistair Darling, to delay next month’s increase. The AA warns that, at a time when the UK is at the brink of recovery from severe recession, such increases could tip the balance and send the economy back into a slump. The last time prices were close to this level was almost two years ago, when the wholesale price of crude oil climbed close to $150 per barrel. At present it stands at $80 per barrel.
So why are pump prices so high? There are two reasons. First, there’s the exchange rate between the dollar and sterling. The British £ has declined against the US dollar, a trend sharpened by fears that the coming UK general election could leave both major parties without a workable majority, leading to a ‘hung’ Parliament. Second, there’s the question of supply and demand. The last time prices hit a peak, world demand was a major factor. By now, major oil producers say there is plenty of oil and they have spare capacity to refine more. However, the AA says that market speculators are pushing up prices by ‘managing’ market demand. This was one of the key reasons behind a 17% increase in European wholesale fuel prices.
There is, at least a crumb of comfort for drivers of diesel-engined cars. The last time prices peaked, diesel pump prices were 10p per litre dearer than for unleaded. Now they are the same or, at worst just 1p to 2p dearer.