The real cost of the fuel price hike


Cast your mind back 12 short years to the turn of the century.

You may remember the country in general and hauliers in particular got themselves into something of a lather over the price of fuel. Refineries were blockaded and pumps ran dry as, at one stage, fuel deliveries dropped to just five per cent of normal.

What is perhaps less easy to recall is that the horrendous price of that fuel which so nearly brought the country to its knees was just 80 pence per litre.

I read in the papers this week of outrage when someone spotted diesel being sold on a motorway for 150.3 pence per litre though why they were so surprised is beyond me. On my travels I’ve been seeing prices like this and higher for some weeks now. Yet as I write there appears to be no appetite in Downing Street to delay further the 3ppl tax hike in fuel due in the budget three weeks from now. If we carry on at this rate very soon the price of fuel will be double what it took to cripple the country just a dozen years ago. And I know we’ve had some inflation since then, but this is getting ridiculous.

Of course Mr Osborne will wring his hands and say he needs the revenue to reduce his deficit, but I wonder how his figures are calculated. A level economics taught me that supply and demand meet at the price and if you raise the price ergo you reduce the demand. Of course historically successive Chancellors have treated fuel as one of those goods that give two fingers to economic theory as people will go out and buy almost regardless of cost because they don’t have a choice.

But I don’t think that’s true any more. I admit the evidence is entirely anecdotal but on my travels around the country I can tell you that people not only have a choice, they’re exercising it. Traffic levels are reducing all the time and what’s left on the road is travelling more slowly. Ten years ago you could park your speedo needle at 90mph and expect to be regularly overtaken. Now you can do 80mph and expect to be the one doing most of the overtaking. And reducing your speed by 10mph can reduce your fuel consumption by 20 per cent.

Meanwhile downsizing is the single biggest phenomenon in the car market today meaning that less fuel would be used even if there weren’t fewer cars travelling more slowly on the roads. Which there are.

Nevertheless I expect the tax rise will still net more revenue for the Treasury, but at what cost? I love the fact that I can get in the car at almost any time of day now and so long as I avoid a few well known choke points, expect to get where I’m going without delay, but I can’t imagine it’s good for the economy. What we need are measures to move the price of fuel down, not up, and get the country moving again.

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