Brian Madderson: Time to act on fuel-price crisis

Both parties had embraced ideas into their respective manifestos for dealing with the rising prices. The Lib Dems promised to trial a scheme to assist the rural motorist, and the Conservatives pledged to consider a fair fuel stabiliser so that when global oil moved up, UK excise duty would be brought down – and vice versa.

To the best knowledge of RMI Petrol, the trade association representing some 6,000 independently-operated forecourts in the UK, neither of these schemes were discussed with industry. 

Treasury chief secretary Danny Alexander MP, who championed the rural idea to assuage the concerns of his constituents in an area round Inverness, revealed a very downbeat scheme in October 2010.  This offered to provide a duty rebate of 5p per litre, but with extremely restrictive terms. 

Firstly, it seems rather surprisingly that any variation to duty would have to be approved by the Finance Ministers of all the other EU countries which could take – by his own admission – 18 months.

Then the geographical areas were to be limited to a few islands in the north and west of Scotland, plus the Scilly Isles which boast fewer than 100 cars. This scheme was a complete sham and I denounced it at the time. It did nothing to help rural Yorkshire motorists, for example.

The Conservative proposal was largely condemned by the Office of Budget Responsibility last September, but still surfaces from time to time – as evidenced during David Cameron’s visit to the Caterpillar plant, in Leicester, during January. 

RMI Petrol and other industry bodies have written to the Chancellor advising that the system envisaged is just unworkable. We are sure that no such concept will be launched in this month’s Budget, if ever. Meanwhile, taxation on road fuels has been ramping up, partly through the legacy of the Labour Government on duty, with increases of one pence per litre on October 1 and 0.76 pence on New Year’s Day.

Then there is the mind-blowing 5p per litre hike from the “escalator” that is due on April – all with VAT added.

Furthermore, the global price of crude oil was already moving steadily upwards when political tensions in the Middle East erupted and prices leapt to $120 a barrel – the highest level since July 2008.

How have these factors affected prices at the pump?  Spare a thought for the independent retailer.

Since February 21, the wholesale cost has moved up by more than 4p per litre for unleaded petrol and nearly 6p for diesel. Such rapid and extensive increases are unprecedented.

This has produced a desperate pricing scenario for independent garages as they buy on a daily, two-day (or for the few) weekly lag. Thus they need to increase prices daily at the pump to retain their meagre gross margin levels of around 4p per litre.

However the “hypers” buy on a two-week lag basis (and some are believed to have duty deferment arrangements, too) so have not yet seen any increase to their wholesale costs.

The result is that Asda is still pricing at, say, 126.9p per litre for unleaded, whereas the independent garage needs to be at 132.9 per litre. Similar pricing differentials apply to diesel.

Additionally, these exceptional cost rises are placing the independent retailer under intolerable cashflow pressure.

The prospect of much of the UK becoming a rural “fuel desert” is becoming ever more a plausible outcome unless the Government acts.

Brian Madderson is chairman of RMI Petrol which represents petrol retailers and forecourt operators