Spring Budget Reaction 2022
Over the last year, diesel prices have risen over 40%
Wars, pandemics and supply issues have all conspired to inflate the wholesale price.
Spring Statement
In his Spring Statement, Chancellor Rishi Sunak cut fuel duty by 5p a litre.
Rishi Sunak said was “the biggest cut to all fuel duty rates ever”. The move kicked in at 18:00 GMT on Wednesday 23rd of March and will last until March 2023.
The effect of the reduction is to take £3.30 off the cost of filling the average 55-litre family car.
With inflation set to go above 8%, this was an attempt by the government to ease the pressures of rising prices.
Will it work?
The prices at the pump are based on the buying price on the wholesale prices when the fuel was bought. Suppliers buy in bulk so the cuts will only take effect when they need to refuel their sites. For many branded sites, the result of the Chancellor’s decision may take effect but other fuel providers such as major supermarkets have taken almost immediate action. Retailers such as Tesco, Sainsbury’s, Morrisons and Asda have made price cuts overnight.
The benefits of the cuts will only be beneficial in the long term if the wholesale price of oil stabilizes, otherwise, they will be negligible.
Wholesale Prices
As a result of the continuing war in Ukraine, Middle Eastern oil producers agreed to increase production. The news temporarily stabilized prices with prices dropping from $139 a barrel dropping to $100 before rising again to $120.
What makes up the price of a litre of fuel at the pump?
- 35% fuel duty
- 33% cost of fuel to supplier
- 17% VAT
- 8% Retailers profit
- 7% cost of biofuel content
- 1% Supply and delivery costs
Industry Comment
RAC head of policy, Nicholas Lyes, said:
“The reality is that a 5p cut in duty is something of a drop in the ocean. In reality, reducing it by 5p will only take prices back to where they were just over a week ago. There’s also a very real risk retailers could just absorb some or all of the duty cut themselves by not lowering their prices. If this proves to be the case it will be dire for drivers. It also wouldn’t be totally unexpected based on the biggest retailers not reducing their prices late last year when the oil price fell sharply. Temporarily reducing VAT would have been a more progressive way of helping drivers as the tax is applied at the point the fuel is sold, removing any possibility of retailers taking some of the tax cut themselves to increase their profits”.
How Can Cambrian Help?
Cambrian Fuel Card Services was formed 46 years ago and the key to our longevity is our customer service. We endeavour to give our customers the best price despite being at the mercy of the fluctuating nature of the wholesale market just like everyone else. The relatively small size of our purchases compared to oil giants and supermarkets allows us to be more reactive to the wholesale prices. This means that our prices may rise quickly but also fall faster.
To find out about our fuel cards click here – https://www.cambriancards.com/fuel-cards/
To find out about our telematics solutions click here – https://www.cambriancards.com/telematics/
Spring Budget Reaction 2022
