Petrol and Diesel Prices

Transcription

1 BRIEFING PAPER Number 4712, 17 March 216 Petrol and Diesel Prices By Noel Dempsey, David Hough, Cassie Barton Inside: 1. Trends in pump prices 2. Trends in pre-tax prices 3. Tax 4. International comparisons 5. Why did diesel become so much more expensive than petrol? 6. Reference Tables 7. Appendix I Historical pump prices 8. Appendix II -Prices across the EU from the mid-199s intranet.parliament.uk/commons-library

2 Contents Summary 3 1. Trends in pump prices 4 2. Trends in pre-tax prices Oil prices 6 3. Tax 7 4. International comparisons 1 5. Why did diesel become so much more expensive than petrol? 12 Diverging trends in demand Reference Tables Appendix I Historical pump prices 16 Retail price trends 17 Duty and VAT trends Appendix II -Prices across the EU from the mid-199s 22 Cover page image copyright: Image is copyright free under Creative Commons CC

3 3 Petrol and Diesel Prices Summary Between 29 and 212 road fuel prices increased sharply. By summer 212 prices reached record highs. Since then the overall trend of fuel prices has been on a sharp downward trajectory. Between October 214 and February 215 petrol prices dropped 15.4% and 12.5% for diesel. Prices as of January 216 are between a quarter and one third lower than in June 212. The typical retail price for petrol as of January 216 is 11 pence per litre and 12 pence per litre for diesel. The price increases from late 21 were as a consequence of rising oil prices, the weaker pound and increases in duty and VAT. Higher fuel prices since early 211 were caused by higher oil prices following the political unrest in the Middle East and particularly the revolt in Libya. Increasing tension between Iran and the West pushed up oil prices again in early 212. The decreases in fuel prices from 214 to present are the result of over production from OPEC countries as well as reported slow-downs in major economies, such as China, resulting in a reduction in demand for oil. Typical retail price of premium unleaded petrol and diesel, pence per litre Petrol Diesel Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-1 Jan-3 Jan-5 Jan-7 Jan-9 Jan-11 Jan-13 Jan-15 Source: Quarterly energy prices, DECC. Table This note looks at trends in the price of petrol and diesel at the pump and before tax, possible reasons for the gap in prices between the two fuels and compares prices and taxes in different countries. Trends in the pump and pre-tax price of road fuel and other petroleum products are given in DECC s Quarterly energy prices publication. The AA s Fuel Price Reports has daily national average prices. gives daily average prices and local figures. The Hydrocarbon Oils Bulletin from HMRC includes details of changes in duty rates and revenues. The European Commission s Oil Bulletin gives a weekly comparison of pump and pre-tax prices of fuels across the EU. The International Energy Agency s Monthly Energy Prices shows trends in fuel prices for the largest OECD economies. Their Oil Market Report gives background to changes in oil and product prices. Readers may also find the following standard notes useful: Oil prices and Energy price rises and their impact on demand.

4 Number 4712, 17 March Trends in pump prices Table 1 in section 6 summarises monthly fuel price data from 1989 onwards. The chart opposite looks at trends in pump prices over this time. Trends for petrol and diesel were broadly similar over this period differences are looked at in the next section. 199s While there were regular peaks and troughs, most of the 199s was characterised by a consistent long term increase that averaged around 2.7 pence per litre each year. Typical retail price of premium unleaded petrol and diesel, pence per litre Petrol Diesel Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-1 Jan-3 Jan-5 Jan-7 Jan-9 Jan-11 Jan-13 Jan-15 Source: Quarterly energy prices, DECC. Table to 212 Prices increased at a faster rate in late 1999 and 2 which led to the September 2 fuel protests when petrol and diesel were an average of 8.2 and 82.3 pence per litre respectively. Prices subsequently fell back to around 75 pence per litre in 22. The spike that immediately followed the invasion of Iraq was short lived; petrol and diesel prices were 76 and 78 pence per litre respectively at the end of 23. Prices fell in early 27 and February 27 prices were broadly consistent with the long-term price rises seen in the 199s. However, early 28 saw the fastest period of price increases of recent decades and typical retail prices at mid-july 28 were pence per litre for petrol and pence per litre for diesel. Prices fell back sharply over the second half of 28, but, apart from summer 21, increased in nearly every subsequent month of 21. The mid-may 211 price of pence for a litre of unleaded petrol was the highest cash price ever until the March 212 figure of per litre. The pence for a litre of diesel in May 211 was also a cash record. It was exceeded in February 212 and again in March 212 when the average price was pence per litre. Both prices peaked in April 212; at and pence per litre for petrol and diesel respectively. Prices fell soon afterwards and subsequent increases have been short-lived and have not yet taken levels back to the April 212 highs.

5 5 Petrol and Diesel Prices 214 to date From autumn 214 to spring 215 the price of petrol and diesel fell sharply to the lowest levels since 21 driven chiefly by the drop in world oil prices. There was a slight recovery up until the middle of 215 although this was followed by another sharp decrease. In January 216 the price of petrol was 11.8 pence per litre and pence per litre for diesel. The table opposite gives the latest weekly fuel prices. The latest data show a stable price for petrol over the past six weeks, whereas diesel has been more varied. Average UK fuel prices in the last 6 weeks pence per litre Petrol Diesel 1 Feb Feb Feb Feb Feb Mar Source: Quarterly energy prices, DECC Table 4.1.1

6 Number 4712, 17 March Trends in pre-tax prices Table 1 (in section 6) also includes pre-tax price figures and these are illustrated opposite. This helps to identify the impact of duty increases and oil prices. Again there were numerous peaks and troughs, but the trend in pre-tax prices of both fuels was static or downwards for much of the 199s. Pre-tax price of premium unleaded petrol and diesel, pence per litre Petrol Diesel The increases in pump prices Source: Quarterly energy prices, DECC. (shown in the first chart) were driven by increases in duty the so-called road fuel duty escalator. The lows seen in early 1999 were 9.4 pence per litre for petrol and 9.3 pence per litre for diesel. There were new record high pre-tax prices for both fuels in each month from December 27 to July 28, followed by sharp falls in late 28. The April 212 pre-tax price of petrol was 6.5 pence per litre; 18% above the July 28 level. Jan-9 Jan-92 Jan-94 Jan-96 Jan-98 Jan- Jan-2 Jan-4 Jan-6 Jan-8 Jan-1 Jan-12 Jan-14 Jan-16 The pre-tax price of diesel marginally exceeded its July 28 high when it reached 63. pence per litre in March 212. It increased to 65.4 pence per litre in April 212. Pre-tax prices were relatively stable for much of 213 before decreasing sharply in 214/ Oil prices The chart opposite plots index values for oil prices and the pre-tax prices of road fuel. This shows a general close match in trends. Oil prices tend to be more volatile and road fuel prices tend to lag behind oil price trends. Crude oil prices are not the only element of the pre-tax price which also includes refinery costs/profits, transport and marketing. DECC does not routinely publish data on the breakdown between these elements. Index of pre-tax fuel prices and oil acquired by refineries, 25=1 Petrol Oil Diesel Jan-9 Jan-92 Jan-94 Jan-96 Jan-98 Jan- Jan-2 Jan-4 Jan-6 Jan-8 Jan-1 Jan-12 Jan-14 Jan-16 Source: Quarterly energy prices, DECC

7 7 Petrol and Diesel Prices 3. Tax The data in Table 1 show how the total tax take from road fuel has changed over time. Falling fuel prices and the fuel duty escalator saw the tax take rise during much of the 199s to a peak of 86% in early The relatively small increases in duty between 21 and 28 and higher oil prices saw the tax take fall to 57% (petrol) and 53% (diesel) in July 28. Both rates increased as prices fell in late 28 and early 29; petrol to 74% and diesel to 66%. This trend was reversed mainly due to higher prices between 21 and 214. Once prices started decreasing at the end of 214 and through 215 the tax take increased once again. At January 216 tax take was 74% for petrol and 73% for diesel. Changes in duty rates in cash terms are given in the first chart opposite. Again this clearly illustrates the increases during the 199s due to the operation of the road fuel duty escalator. VAT is levied on the post-duty price and hence on the duty and the pre-tax price. Duty rates on each fuel have been identical or very close for the period shown so any difference in total VAT per litre is connected to the pre-tax price. Duty rates were cut or frozen for around six years from early 2. The second chart opposite plots the rate for petrol in real terms. It shows a gradual cut in the real rate of duty from 2 to late 28. By autumn 28 duty was lower than it had been in real terms since autumn Subsequent duty increases and lower/negative levels of inflation caused a sharp rise in the real duty rate in Main road fuel duty rates, pence per litre Source: Hydrocarbon oils bulletin, HMRC Main petrol duty rates in real terms pence per litre in 212 prices Duty increases in 21 and January 211 were nearly matched by higher inflation, so the real level remained broadly constant. The Budget Petrol Diesel Source: Hydrocarbon oils bulletin, HMRC; ONS series CHAW

8 Number 4712, 17 March duty cut took real rates down to early-29 levels and the subsequent freezing of duty has meant its real value is currently the lowest since late Pre-tax price increases add to the VAT on a litre of fuel. The real value of the total tax on a litre of petrol fell by around one-sixth between summer 2 and summer 27. With no duty increases since 211 the real value has fallen and the January 216 level was around 9% below mid-211. VAT was cut from 17.5% to 15% in the 28 Pre-Budget Report and petrol and diesel duty were increased by 2 pence per litre. It was announced that: 1 the cost of petrol and diesel will fall for private motorists who should see no increase in the price they pay at the pump this year from this measure. The net effect of these changes depended on the underlying pre-tax price of petrol and diesel as these determine VAT yield per litre. Higher pre-tax prices increase the VAT yield and vice versa. The net effect of the cut in VAT and 2 pence increase in duty was to slightly increase the tax on a litre of petrol in early 28, but as prices increased the net effect was to cut it for the rest of the year by an average of.25 pence per litre. The net effect on diesel was a small cut for the whole year. The VAT cut was temporary; it returned to 17.5% at the end of the year. The duty increase was not reversed there were further increases in April and September 29. Following the 29 Budget duty rates increased by 2 pence per litre on 1 September 29 and was announced that they would increase by a further 1 penny a litre in real terms in each year each April from 21 to In effect a return to the fuel duty escalator, albeit one which moves more slowly than the 199s version. Budget 21 announced that the 21 increase would be staged: one penny increase in April, one penny in October and.76 pence in January The October 21 and January 211 increases were implemented by the Coalition Government under plans inherited from the previous Government. VAT increased from 17.5% to 2% on 2 January 211. In Budget 211 the Chancellor announced he would abolish the fuel duty escalator and instead cut duty by one penny per litre on 23 March. He also announced a fair fuel stabiliser where duty rises in line RPI inflation when oil prices are high, but increases by RPI plus one pence per litre when they are low for a sustained period. In the Autumn Statement 211 the Chancellor announced that the duty increase that was due in January 212 would be deferred until 1 August 1 Facing global challenges: supporting people through difficult times, Pre-Budget Report press notice 24 November 28, HM Treasury 2 Budget 29 Building Britain s future, HM Treasury 3 Budget 21 Securing the recovery, HM Treasury

9 9 Petrol and Diesel Prices 212. The inflation increase which was due on 1 August 212, thought to be worth 1.92 pence per litre, was cancelled. 4 Budget 212 made no change to the existing plan to increase duty on petrol and diesel by 3.2 pence per litre on 1 August 212. However, the Chancellor announced on 26 June 212 that this duty increase would be delayed again, until 1 January This increase was cancelled in the Autumn Statement 212 and the planned put back from April to September Budget 213 cancelled the September 213 duty increase. 7 In the Autumn Statement 213 the Chancellor announced that fuel duty would be frozen for the rest of the Parliament (to 215). 8 Budget 211 also announced the Government s formal request to the European Commission for rural fuel duty rebate pilot. This could cut duty by five pence per litre in the Inner and Outer Hebrides, the Northern Isles, the islands in the Clyde and the Isles of Scilly. In Budget 216, the Chancellor continued the freeze on fuel duty. 9 Fuel duty has not been increased for around five years the longest such period since the late 196s/early 197s (during which VAT was first levied). 1 According to Budget 216 the average driver would will save around 75 per year compared to if pre-21 duty plans had been implemented Autumn statement 211, HM Treasury 5 Chancellor announces support for motorists, press notice 26 June 212, HM Treasury 6 Autumn statement 212, HM Treasury 7 Budget 213, HM Treasury 8 Autumn Statement 213, HM Treasury 9 Budget 216, HM Treasury 1 See the table in Appendix I for sources 11 Budget 216, HM Treasury

10 Number 4712, 17 March International comparisons Table 2 at the end of this note compares diesel and petrol prices and taxes for all EU member states. The charts below illustrate this information for early-march 216. BGR POL CZE EST LVA HUN LUX LTU ROU AUT ESP CYP CRO SVN SVK BEL IRL DEU FRA FIN GRC GBR MLT SWE PRT DNK ITA NLD Unleaded petrol pump prices in the EU taxes and duties pre-tax price Source: EU Oil Bulletin 7 March 216 BGR POL LVA LTU LUX CZE ESP SVK AUT GRC HUN CRO EST SVN ROU DEU BEL FRA CYP NLD IRL PRT DNK FIN ITA MLT SWE GBR Source: EU Oil Bulletin Diesel pump prices in the EU 7 March 216 taxes and duties pre-tax price The UK s petrol price on 7 March 216 was the seventh highest in the EU. During the closing years of the 2s the UK had moved down this list from first place as rates of duty increased in other member states, rising oil prices had shifted the balance from taxes to the pre-tax price and the value of Sterling had been generally weaker against the Euro. From 212 onwards the UK moved back up this list in large part due to the relative weakness of the Euro. At the same time the UK s diesel prices were the most expensive in the EU. The price of diesel in the UK was clearly the highest in the EU for many years, but the gap to the next highest countries fell substantially over time-again due to duty increases elsewhere, higher pre-tax prices and exchange rate movements. The Social Indicators article Road Fuel Prices and Taxes Across the EU gives much more background on the subject up until 212. Appendix II to this note extends the EU time series data.

11 11 Petrol and Diesel Prices UK diesel duty rates are still considerably higher than elsewhere in the EU. The chart opposite gives recent duty rates for the EU27. The UK s duty rate on petrol was second highest, it had been the highest for some years, but changes in the exchange rate and increased duty rates elsewhere have altered the situation. Differences in diesel duty rates are starker. Every other member state had lower duty rates for diesel; the diesel discount was 3% or more in some countries. The result was that the diesel duty rate in the UK was 1.1 pence per litre (21%) higher than any in any other EU country and 23 pence (71%) above the simple (unweighted) average for the other 27 members. Higher VAT rates in most other EU countries mean that differences in total tax on a litre of fuel are somewhat smaller. GBR February 216 petrol prices for the largest OECD economies 12 varied (in $US) from $1.52 in Italy to $.47 in Source: EU Oil Bulletin the US. Diesel prices were highest in the UK at $1.44 and lowest in the US at $.52. Pre-tax prices varied between countries by around $.14 per litre for petrol and $.15 per litre for diesel. 13 LTU LUX POL GRC LVA HUN ESP EST CRO CZE SVK AUT DNK ROU CYP BEL PRT DEU MLT SVN NLD FIN IRL FRA SWE ITA EU road fuel duty rates 7 March 216 pence per litre Petrol Diesel USA, UK, Japan, Germany, Italy, France, Spain and Canada. 13 Monthly Oil Price Statistics, IEA

12 Number 4712, 17 March Why did diesel become so much more expensive than petrol? The current duty on diesel (57.95 pence per litre) is exactly the same as that on petrol. Duty rates have been the same for the large majority of the last 2 years. 14 Therefore the difference in price between petrol and diesel is not due to tax, but is down to the difference in pre-tax prices. A number of factors have pushed up the relative price of diesel over time, the most important of which are thought to be the long term increase in demand for diesel and limited refining capacity. The price gap virtually disappeared during much of 29, but grew again in winter 21/11 and in late 211 remaining largely stable until near the end of 215 when the cost of diesel was less than petrol although this was short lived. The earlier charts show that the underlying cost of diesel was less than petrol in the early 199s. It routinely became more expensive from 1999 onwards and until recently the gap had generally increased since. There is also some evidence in the large price variations since 21 that compared to petrol, diesel prices are sticky downwards when prices fall they do not fall as much as those of petrol. This will be in part due to the fact that the underlying increase in diesel prices has been greater, but also due to diesel s seasonal fluctuations this may also in part be because many of the large petrol price falls have been in the winter months, when diesel prices tend to increase (relatively). The chart opposite plots monthly price differentials since January 199. This helps to illustrate the increase in the scale of the price gap up to 28. It also shows a seasonal pattern in some years. Diesel is a gasoil produced from the same distillate of crude oil as heating oil. Therefore in the colder months when heating oil demand increases there is greater demand for this product of the distillation process and price responds to the increase in demand Jan-9 Jan-92 Jan-94 Jan-96 Jan-98 Jan- Jan-2 Jan-4 Jan-6 Jan-8 Jan-1 Jan-12 Jan-14 Jan-16 Source: Quarterly energy prices, DECC Difference in the pre-tax price of diesel and petrol -excess of diesel over petrol (pence /litre) Hydrocarbon oils bulletin December 211, HMRC

13 13 Petrol and Diesel Prices The seasonal pattern appears to have become stronger and/or clearer since 21. The seasonal pattern in price gaps can also be affected by the increased demand for petrol, in North America particularly, during the summer driving season. The April to July 28 price gaps increased when the past seasonal pattern suggested a fall. Seasonal patterns can only explain a small part of the increase in the price to 28. Diverging trends in demand Overall trends in road fuel use help to explain at least some of Petrol Diesel the relative price changes shown above. In the UK petrol consumption 15 fell in each year between 1998 and 214, while diesel consumption increased in each year other than 27 and 28. The total drop in petrol consumption since 1998 was 43%, while diesel consumption rose by 49%. 16 Trends are illustrated in the chart opposite. Diesel became more popular than petrol in 25. In the early 197s petrol consumption was three times greater than diesel consumption. Volume of motor fuel delivered in the UK, million litres Source: Digest of UK energy statistics 213, DECC. Long term table Total quantity released for consumption 16 Digest of UK energy statistics, DECC

14 Number 4712, 17 March Reference Tables Table 1 Typical UK retail prices, pre-tax prices and tax take pence per litre Premium unleaded petrol Diesel retail pre-tax % tax take retail pre-tax % tax take Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Jan % % Aug % % Sep % % Oct % % Nov % % Dec % % Jan % % Source: Quarterly energy prices, DECC Table 4.1.1

15 15 Petrol and Diesel Prices Table 2 Average Petrol (a) and Diesel Prices and Taxes in EU member states 7 March 216 Pump price per litre per litre Petrol Taxes and duties Pre-tax price Pump price Diesel Taxes and duties % of pump % of pump price per litre per litre per litre price Pre-tax price per litre BEL % %.3 BGR % %.3 CYP % %.33 CZE % %.28 DNK % %.36 DEU % %.3 GRC % %.36 ESP % %.32 EST % %.34 FRA % %.27 HUN % %.32 IRL % %.29 ITA % %.29 LVA % %.29 LTU % %.31 LUX % %.33 MLT % %.43 NLD % %.3 AUT % %.3 POL % %.28 PRT % %.33 ROU % %.32 SVK % %.3 SVN % %.26 FIN % %.32 SWE % %.34 GBR % %.27 Notes: Prices converted to sterling on basis of exchange rates on date listed Comparisons between countries require care because of differences in product quality, marketing practices, market structure sales of other types of fuel. (a) Super unleaded petrol (Euro super 95) Source: EU Oil Bulletin

16 Number 4712, 17 March Appendix I Historical pump prices The first hand operated petrol pumps were introduced in Britain in 192. Before then petrol had been sold in cans. In the subsequent 9 years there have been numerous changes in the quality/grade of petrol, its lead and sulphur content and how its price and distribution has been controlled. This note does not attempt to describe these changes. If readers are interested in changes in the retail market up to the mid- 196s they should look at Petrol: A Report on the Supply of Petrol to Retailers in the United Kingdom which was produced by the Monopolies Commission in Chapter 2 gives a description of the retail petrol market up to that time. Some of the major events and changes which affected petrol prices and sales are listed below: 17 January removal of the consumer tax on petrol April 1928 duty imposed on petrol September 1939 Petroleum Board made up of UK suppliers became an executive body working under Government direction. A single grade of petrol sold and rationing introduced Petroleum Board ends, new zonal price system introduced and fixed prices become maximum prices. May 195 rationing ends February 1953 branded petrol returns and is sold in two grades December 1956 Suez crises leads to rationing (to May 1957) and 4% increase in duty (reduced in April 1957) 1967 star grading of petrol introduced April to December 1974 First Oil Shock leads to maximum prices for petrol set by regulation VAT introduced at 1%, later increased to a higher rate of 25% (to April 1976) March 1989 unleaded/leaded duty differential increased to 2.7 pence per litre (15%) 1993 road fuel duty escalator introduced September 2 high duty/prices lead to protests, blockades of some refineries and widespread shortages. November 2 cut in fuel duty and end of the escalator announced August 28 record oil prices lead to pump prices peaking at 12 pence per litre. Early 211 to 212 political unrest in the Middle East adds to underlying increase in oil prices. These combine with the relatively weak value of Sterling, increases in duty and VAT to give new 17 UK petrol prices (192-22) and diesel prices ( ), Energy Institute; Petrol: A Report on the Supply of Petrol to Retailers in the United Kingdom; Monopolies Commission 1965

17 17 Petrol and Diesel Prices record high cash prices in each of the first five months of 211. Increasing tension between Iran and the West pushes up prices in early 212. Autumn 214 to present sharp declines in oil prices lead to pump prices reducing to lowest levels since 27. The charts later on in this section and the table at the end illustrate changes in the retail price of a litre of petrol since 192 and changes in its taxation. Prices were not allowed to freely float and reflect market conditions for much of the early part of this period. They were either set by agreement between petrol suppliers and retailers or, occasionally, set by the Government. Prices were managed and price changes were relatively infrequent. The figures given in the charts and tables are meant to give a general impression over time, not a precise guide. The data are for occasional times (general changes in prices or taxes) up to 1973, quarterly or more frequent to 1988 and monthly thereafter. Prices have been adjusted to 212 levels using single annual inflation estimates before This introduces a further element of imprecision, especially when prices were rapidly changing in the early 192s. Retail price trends The first chart on the following page gives real price trends for different grades of petrol from 192 onwards. These are set alongside some of the major events related to petrol prices and sales. April 212 prices were higher than the 28 peak in real terms and above the peak which followed the lifting of price in 1974/75. They were also very slightly above the peak during the Suez crisis. The difference is around one percentage point which could be affected by the adjustments for inflation. The April 212 (and May 211) real prices should therefore be seen as broadly equivalent to those during the Suez crisis when petrol was rationed and duty was increased by 4%. The highest price on this series is the first one; April 192. This was the first ex-pump price and it is highly likely that then, as now, new technology initially comes at a higher price. After this initial spike their wider adoption and the greater economies of large storage tanks will have helped to reduce prices. The lowest real pump prices in recent times were in the late 198s and early 199s when low oil prices were combined with cuts in duty (for unleaded). Petrol was below 8 pence per litre (212 prices) for much of the time from late 1989 to early 1991 apart from a brief spike when Iraq invaded Kuwait. There were broadly similar prices immediately before both the oil shocks of the 197s and official prices for rationed petrol after the end of second world war were lower still in real terms. The lowest prices for the whole period were just before duty was reintroduced in April Petrol was just over a shilling a gallon (around 55 pence per litre in 212 prices).

18 Number 4712, 17 March Duty and VAT trends The real level of duty and VAT is given in the second chart. This starts in 1928 when duty was reintroduced. There are eight major periods which can be distinguished: Up to 195 generally low real levels of duty, the only exceptions are the increases in 1931 which saw duty double in less than a year. The real duty level fell considerably during most of the second world war and immediately afterwards 195 to the late 196s early rapid increases in duty were maintained in real terms through much of this period. The shortlived sharp increase in duty during the Suez crisis is clear Late 196s to 1974 cash value of duty is held constant, real value falls by around 3% 1974 to 1989 VAT introduced, duty (on its own) less than at any time since the 194s. Combined value of duty and VAT increased rapidly jumps in 1974 and to 2 the impact of the road fuel duty escalator and, to a lesser extent, higher VAT and oil prices, means the total tax per litre increases by almost 9% in real terms 2 to 27 falling real value due to cuts or freeze in duty. 27 to 211 return of a duty escalator for the first years and an increase in duty and VAT in to present duty frozen or cut and no further increases in VAT.

19 19 Petrol and Diesel Prices Petrol prices since 192 New pence per litre, earliest price in each year Retail price Duty Retail price Duty cash 211 prices cash 211 prices VAT rate cash 211 prices cash 211 prices VAT rate % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % Notes: Prices are the earliest given in each year. From 1973 these are January prices, earlier figures could be for any time during the year. Petrol was rationed from September 1939 to May 195 and from December 1956 to May 1957 (Suez) Maximum prices were set by regulation between April and December 1974 Higher rate VAT applied to petrol from 1975 to 1979 Prices adjusted to 21 using HC Library Paper 3/82 Inflation: The value of the pound and all-items RPI 1962; ONS series CHAW and CZBH Grades: No. 1, 192 to star 1967 to 1989 "Pool" petrol, 1939 to 1952 Premier, 1953 to 1966 Premier, 1953 to 1966 Premium unleaded 199 onwards Sources: UK petrol prices (192-22) and diesel prices ( ), Energy Institute Energy trends, Department of Energy, various editions Quarterly energy prices, DECC Table 4.1.1

20 Number 4712, 17 March Changes in the real price of petrol and major events since 192 pence per litre in 212 prices Tax on petrol removed Petrol rationed during and after WW2 Petrol rationed due to Suez crisis Maximum prices set during first 'oil shock' Second 'oil shock' Iraqi invasion of Kuwait/ first gulf war September 2 fuel protests Start of 2nd Gulf War Commodity boom followed by start of financial crisis Political unrest in the Middle East

21 21 Petrol and Diesel Prices 9 Real levels of VAT and duty on petrol pence per litre 212 prices 9 8 VAT Duty

22 Number 4712, 17 March Appendix II -Prices across the EU from the mid-199s The Social Indicators article Road fuel prices and taxes across the EU looks at how prices and taxes have varied over the past decade or so. This appendix looks at earlier data on prices back to The earlier data is important because it covers the period immediately after the fuel duty was introduced. The UK s average prices of petrol and diesel became the most expensive in the EU during the late 199s. Three charts are included over the following pages; petrol prices in each EU state, diesel prices in each EU state and the exchange rate. The exchange rate is important, as the article explains, because of the size and the timing of the shifts over this period. For instance, in the mid to late 199s when the fuel duty escalator increased real duty rates, the value of Sterling weakened and the two effects both made the relative price of UK road fuels even more expensive. From 27 to 29 the value of Sterling weakened sharply against the Euro and this more than outweighed real duty increases in the UK. The net result was that the UK s relative prices fell when expressed in Euros. The most obvious shift in UK prices compared to the rest of the EU came between summer 1996 and autumn 2. The UK s petrol prices went from the cheapest in the EU15 to the most expensive by a margin of 15-2%. UK diesel prices were the fourth most expensive in the EU15 at the start of this period, soon became the most expensive and were so by a margin of 4-45% at the end of this period. Road fuel prices and taxes across the EU looks at later shifts in prices in more detail. All the underlying data can be found at:

23 23 Petrol and Diesel Prices Diesel prices in EU member states /ECU per litre UK Other member states Petrol prices in EU member states /ECU per litre UK Other member states

24 Number 4712, 17 March Exchange rate /

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