18.01.08 The arrival of £5 a gallon diesel
Do you think £5 a gallon is too expensive for diesel?
When petrol prices hit the £1 a litre mark last year motorists and hauliers were understandably outraged. However, the price of diesel went through the £1 a litre mark a long time ago, and has showed no sign of falling since. The national average price diesel currently stands at 109.3p per litre, less than 1p away from £5 a gallon. This time last year these pump prices were unthinkable, but today 43% of petrol stations nationwide are selling at, or above, £5 a gallon - we are fast approaching an era where this is the norm. How has this happened?
As little as 10 years ago, diesel and unleaded petrol were the same price – 63.3p per litre. Thanks to a combination of inflation, exorbitant tax and rising world oil prices, we can only dream of the days when fuel was that cheap, but it raises an important question – why is diesel more expensive than petrol today? Also, in the majority of European countries diesel is cheaper than petrol, so why do UK motorists have to pay more?
Diesel cars became popular in the 1970s thanks to their economical and environmental benefits, but with diesel headed towards £5 a gallon, perhaps diesel users will be forced to rethink the switch, and consider whether or not they really are saving money. 10 years ago a diesel car doing an average of 40mpg, driving 9000 miles a year, would have cost £647.55 to run. Today the cost is a whopping £1125 – leaving a typical diesel motorist £477.45 out of pocket per year, compared to 10 years ago.
For haulage companies, who use much more fuel, the continually rising diesel prices leave them with an even bigger financial gap to bridge. Many are left with no choice but to pass the extra costs on to their customers, so as the price of diesel goes up, the cost of transporting food and other essential goods goes up too. Any further increases in the price of diesel could trigger the end of cheap food in the UK.
For once, government tax is not to blame for making diesel more expensive than petrol. Both types of fuel are subject to a fixed rate duty of around 50p per litre, plus another 17.5% VAT on top of the price of the fuel and the duty added together. Although it explains why the government collects extra tax from motorists when the price of oil forces increases at the pump, it doesn't help to explain why diesel is more expensive than petrol.
There are two main explanations for high diesel prices, aside from instability in the oil markets. Firstly, diesel prices in particular often peak over the winter because it is very similar to the fuel used in a lot of British central heating systems. As demand goes up, the oil companies can charge more, and the cost gets passed down the supply chain, to drivers. This happens every year, but with an extra 983,000 diesel cars sold in the UK's in 2007 alone, relying on diesel to oil our infrastructure could leave us in a very vulnerable position.
The second reason is only exacerbated by our dual reliance on diesel. The UK used to get a lot of its diesel from refineries in the Gulf of Mexico, but as production has slowed, the demand for the available diesel has shot up. In short, there is less diesel available from the UK's traditional supplies to fuel more cars and more central heating systems than ever before. Could this be a taste of what is to come when the last drop of oil finally dries up?
The government can't be held responsible for supply and demand in the energy markets, but they do have the power to ease the financial burden on those who use diesel by cutting tax on fuel. We rely on diesel lorries to transport essential goods around the country, and the world, so surely a tax cut for diesel vehicles would be good for the economy? Tax on both petrol and diesel in the UK is extortionate, and as world markets change it becomes clear that policies that might have made economic sense 10 years ago are in desperate need of an overhaul.
We allowed petrol prices to break through the £1 a litre barrier, and they have continued to rise ever since. The arrival of £5 a gallon diesel should be ringing alarm bells for motorists, but instead of standing up and using our democratic power to force Gordon Brown to address the situation, we close our eyes at the pumps and blindly hand over our credit cards. And if this cowardly behaviour continues we'll be approaching £6 a gallon before we know it.
Is diesel too expensive? Should there be a tax cut for diesel? Or should we be trying to reduce our dependence on diesel altogether?
Your Comments
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How can we use our democratic power if Brown won't call an election?
Filling in petitions on the prime ministers website does nothing - what this government needs is a reminder from hauliers and farmers taking action - blockade the depots again, bring the country to a total standstill like they did 8 years ago.
Remind Brown that the motorist/haulage industry is not a cash-cow to be taxed until it hurts, then taxed and taxed again.
We need competitive haulage rates to curb inflation as distribution costs affect the price of everythign - and provide jobs to our truck drivers - and with the current taxation on fuel, our hauliers cannot compete across Europe, and the price of everyday goods is set to rise.
I agree that another blockade is sorely needed.
In the meantime, why not make the switch to Biodiesel, currently retailing at your local supplier for 82.9p (thanks to NO tax insentive by the government like on LPG).
Most diesel cars will cope with a 50/50 mix and my Mazda 6 TS TD will run on 100%, although it doesn't like cold starts anymore (It looks like I'm electing a new pope with all the white smoke).
I have noticed NO lack of performance and NO change in fuel consumption.
Another pain is that, even though my emmissions are FAR lower than on mineral diesel, I still get stung with £170 tax every year.
While I accept the argumenst about the large on-cost to hauliers and the rapid price inflation, I think the two greatest concerns about diesel prices are as follows:
1) Our government taxes company cars based on their Co2 emissions and recognises diesels to be much more fuel efficient, better for the environment and therfore taxes them at a generally lower rate. Yet when it comes to prices at the pumps the government does nothing to recognise this same fact.
2) The UK is the only European country to charge so much more for diesel compared to unleaded. The only two other countries who charge fractionally more for diesel are those motoring giants Switzerland and Slovakia. In many countries diesel is 10% less than petrol. Is our government trying to tell us they have got it right and the rest of Eruope has it wrong??? Why do we put up with it, or is it that wer all go price-blind when we travel abroad?
I think all hauliers and diesel drivers should find a common voice and start lobbying hard for common sense to prevail.