WMN opinion: High tax on fuel holds back recovery of rural economy
To read the top lines of the Office of Fair Trading report into UK fuel prices you might think everything in the world of petrol and diesel was rosy. Competition, says the OFT, is "working well". Take out the tax and fuel prices in Britain are among the "lowest in Europe". Where prices have risen – and they most certainly have – it is down to rising crude oil prices and increases in taxation, says the OFT – rather than any profiteering by petrol stations. So that's all right then.
Except, of course, it is not. In rural areas soaring fuel prices have had a serious and often damaging effect on the economy, both for businesses and individuals. Simply getting from A to B by car – a necessity not a luxury where public transport is poor – costs proportionally more in rural areas than in urban areas, precisely because there is less competition. And it is the supermarkets entering the fuel market, using their massive buying power to drive down forecourt prices that has had a positive effect for many urban and suburban drivers but has left rural motorists with fewer forecourts to chose from and consequently higher prices to pay.
No one would want to prevent competition in the fuel market. As the OFT points out, in August last year pump prices in supermarkets were 2p per litre cheaper than oil company owned sites and nearly 4.5p per litre cheaper than independently owned petrol stations – great news if you live down the road from a supermarket or drive past one every day on your way to work; not so good if simply taking the trip to the superstore to buy cheap petrol would cost you more in time and fuel costs than the money you would save.
And that is the position increasing numbers of rural motorists find themselves in; miles from a forecourt – any forecourt as more and more close down – and trapped into paying higher prices because those independent rural petrol stations that remain cannot compete with the buying power of the big boys and have no alternative but to charge more at the pumps.
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The OFT has no solutions to those problems. Other commentators, do however. Lower taxes on fuel – as demanded by the Tax Payers' Alliance – are definitely the best way to ease the pressure on drivers and, as this OFT report makes clear, it is the tax which makes up the lion's share of the high cost of motoring – something the Government seems unwilling to acknowledge because it needs to keep on milking the motorist to keep the Treasury coffers topped up. "Motorists who need to drive to work, take their kids to school and get to the shops are suffering with petrol prices which are so high," says the Alliance. "But it is politicians who need to give them a better deal with lower Fuel Duty." Hear, hear to that. Recommending such a course is obviously outside the OFT's remit. It would be a bold and positive step if ministers chose to go down that road. Overall the benefits – especially in rural areas – would more than match the cost.