Petrol and diesel prices at UK pumps have plummeted to their lowest levels in nearly three years, offering temporary relief to motorists. However, this respite may be short-lived as the Labour government is expected to introduce the first increase in fuel duty in 14 years in the upcoming autumn statement. According to data from the AA, the average price of petrol dropped to 139.5p per litre on Wednesday, a level not seen since October 2021. Diesel prices also fell to an average of 144.2p per litre, marginally above the price in July last year and the lowest since October 2021.
This price drop coincides with a decline in global oil markets, where Brent crude prices have fallen from above $80 a barrel in mid-August to $73 this week. The AA noted that these savings were passed on to consumers more quickly than usual, likely due to the anticipated reversal of the fuel duty cut. The current low prices are largely attributed to the 5p fuel duty cut implemented by the previous Conservative government in 2022. However, this cut is expected to be scrapped in the upcoming budget. Unusually, the RAC has backed this decision, citing fuel retailers’ failure to pass on savings to drivers. Edmund King, the AA president, warned that removing the duty cut could have severe consequences for low-income drivers.
He stated, “Pure and simple, the only reason why pump prices are at a three-year low this week is because of the 5p fuel duty cut. Removing it threatens to send millions of low-income drivers back into the era of ‘perma-high’ road fuel prices.” The government’s decision to raise fuel duty is part of a broader strategy to address the £22 billion deficit in public finances left by the previous administration. Critics, including the Social Market Foundation (SMF) thinktank, have labelled the fuel duty cut a regressive policy that disproportionately benefits the wealthy.
The SMF’s analysis revealed that the combined impact of the fuel duty freeze and the 5p duty cut has cost the Treasury £100 billion since 2011 and could reduce its coffers by £27 billion over the next five years. Their findings also showed that the bottom fifth of earners would receive just 10% of the savings, compared to 24% for the top fifth. As the Labour government prepares for what is expected to be a “painful” autumn budget, motorists across the UK are bracing for potential increases in their fuel costs. The impending policy shift marks a significant departure from the previous government’s approach and signals a new era in UK fuel pricing and taxation.
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