How much of the petrol pump price is tax and how much is actually petrol?

'The average price for a litre of unleaded petrol on British forecourts is 123.26p. Of this, 57.19p is fuel tax, 18.36p is VAT, while the actual cost of the fuel is only 47.71p.'

Thanks to Saxon Times for reminding me of this fact.

Why is the petrol price going up?

The BBC manage to report that

"Petrol prices could hit a record high of £1.20 a litre in the next few weeks, according to the AA."

without mentioning how much of the price of a gallon of petrol at the pump is taken in duty and tax. I was going to refer to ABD's useful table but that only goes up as far as £1.099 a litre, being a year or so old. So I used the ABD Fuel Tax Calculator and that shows that with a pump price of £1.20 per litre, VAT accounts for £0.1787 per litre, fuel tax for £0.5619 per litre; so tax and duty makes up 61.72% of the price paid at the pump or put another way - the tax and duty rate on petrol is 161.22%. Now why would the BBC not be interested in revealing that sort of information?

Do the pennies add up?

For the second time in a month I have filled my car with petrol, noted the cost and then found that the price charged was a penny more than was on the pump. Now who complains over a penny on a £50+ petrol bill, not me? Even more oddly, when I get back to the pump the total now reads the penny higher figure.

So what's happening? Is this a scam or are petrol pumps now adding fuel after the nozzle has been holstered? I know it's only a penny per transaction but if it's on every transaction every day...

Gordon Brown breaks a promise

For some odd reason The Lone Voice seems surprised that Gordon Brown has broken a promise.

"At the height of soaring pump prices Prime Minister Gordon Brown made a promise during Prime Minister's Questions on July 16th 2008 not to raise fuel duty for a year. He said: "In recognition of the problem people face with petrol, we are freezing duty on petrol for the full year."

He broke this promise in December 2008 when he added 2p per litre to fuel duty to offset the reduction of VAT to 15 per cent - a move which angered hauliers who are able to claim fuel VAT back, but not fuel duty.

He is set to break the promise for a second time on April 1st 2009 when fuel duty on unleaded and diesel will rise 1.84 pence per litre. Including the additional 15 per cent VAT on top this will make the rise at the pumps around 2 pence per litre."

A question; as the budget is now well into the new tax year this year, is the fuel duty increase due on 1 April legal?

Any chance of Gordon Brown and his "team" following suit?

I note that:

"The Ivory Coast government is halving the salaries of its ministers to pay for a reduction in the price of fuel.

Prime Minister Guillaume Soro said the managers of state-owned companies would also have their pay cut in half, to pay for a 10% cut in fuel prices.

"Having heard the people's cry from the heart, the government has decided to cut the price of fuel," Mr Soro said."

So how about it Gordon, do you feel our pain?

The law of unintended consequences

I hear that the RAC are reporting that rising petrol prices seem to be having another unwelcome result as breakdowns caused by the theft of fuel from cars have more than doubled since the start of the year. Apparently the problem is worst in London where there has been a five-fold increase between January and June.

Windfall income

I asked yesterday

"the government must have had a windfall income of many hundreds of millions of pounds since oil prices started to rise, (can anyone work out how much?)"

Today The FT has the answer:

"Here is the theory of Maurice Fitzpatrick, senior tax manager at Grant Thornton, the accountants:

Tax revenues from North Sea oil would jump from an estimated £10bn - struck when oil was only $84 a barrel - to £16bn at the current price of about $128 a barrel.
Since the Budget in March, the Treasury has already taken an estimated £820m more than its forecasts in North Sea oil tax.
The £6bn of surplus revenue would easily cover the cost of U-turns on both fuel duty and vehicle excise duty, where ministers are introducing new bands which could cost an extra £200 for drivers of inefficient cars.
Deferring the 2p increase in fuel duty by six months would cost £550m. Scrapping the revamped vehicle excise duty altogether would mean the loss of an estimated £465m next year and £735m next year - although ministers may only remove the retrospective element of this tax."

Of course the Treasury dispute this:

"But Number 10 has disputed this, saying this afternoon: “The Treasury has always made clear that the impact of high oil prices on public finances tends to be revenue-neutral over the long-term.”

Here is their argument:

The increased revenues from oil when prices are high are offset by a number of factors including:

* an increase in pump prices leads to an increase in inflation. This knocks through to the inflation-linked payments that the government has to make, including benefits, pensions, tax allowances, and government bonds.

* reduced demand for fuel from filling stations, which reduces revenue from fuel duties - as this is fixed at 50.35p per litre if people buy less fuel, revenue from this falls.
* receipts from profits made by North Sea oil companies have in recent years been to some extent offset by capital costs, and the costs that have been rising for plant and machinery and labour costs too.

So there is a net offsetting effect."

I would rather believe Grant Thornton than anyone in this Labour government.

Petrol hits £1 a litre

I am old enough to remember when petrol first hit £1 a gallon but today it reached £1 a litre. I thought it worth reminding everyone how that £1 is split.

This breakdown of the price of petrol is based on the assumption of a £1 per litre of petrol.

Petrol Fuel Duty - 50.35p

VAT (17.5%) - 14.9p

Refinery Petrol Costs - 31.75p

Forecourt Costs - 3p

Forecourt Profit - 2p


This means that the forecourt cost makes up 5%, the oil cost is around 32% and taxation around 63% of the total cost

Figures from here.

You could take a look at the BBC web site for this news. There you will see one of the most misleading graphics I have seen for years. The graphic showing what proportion of the £1 is made up of Retailer, Duty, VAT etc. The arts educated designer has split the drop of petrol into percentages by height which would be fair enough if the drop was straight sided but it isn't, it is drop shaped. So should the drop not be split by area. As it is VAT looks to make up about 5% by area. Do the BBC know nothing about statistical representations.