Petrol Prices 'Must Fall Faster'
6 November 2014, 12:38
Petrol firms have been warned that the Government will be "watching very carefully'' to make sure the fall in the price of crude oil is passed on to motorists at the pumps.
Treasury Chief Secretary Danny Alexander will demand an assurance from the major players in the industry that they are doing all they can to pass on the benefits of the slump in global oil prices to consumers.
Chancellor George Osborne said the Government had a "very clear'' message that companies should cut fuel prices.
The Government's message came as the latest salvo in a supermarket price war saw Asda, Sainsbury's and Tesco announce 1p cuts in the price of their fuel.
In Asda's case, this means petrol will fall to 119.7p a litre - the first time the price has dipped below 120p in four years - while diesel will be 123.7p.
Mr Osborne said: "Our message today is very clear: the oil price has fallen, we expect that to be passed on to people at the petrol stations as they fill up their cars. We expect the oil companies to do this and we will be watching very carefully to make sure that they do.''
Mr Alexander used a speech in Aberdeen earlier to warn that people would "rightly be angry'' if they felt prices were not coming down as much as they should.
Brent crude slumped to 82 dollars a barrel earlier this week, its lowest level in just over four years.
Mr Alexander said: "Especially in the current economic circumstances, people would rightly be angry if they feel that pump prices don't fall as much as they should on the back of falling oil prices.
"I believe it's called the rocket and feather effect. The public have a suspicion that when the price of oil rises, pump prices go up like a rocket.
"But when the price of oil falls, pump prices drift down like a feather.
"This has been investigated before and no conclusive evidence was found.
"But even if there were a suspicion it could be true this time, it would be an outrage.''
Mr Alexander will write to firms involved in the fuel industry "seeking their assurance that they are doing all they can to pass on the benefit of falling oil prices as quickly as possible''.
But campaigners said the Government has not done enough to help motorists, with tax still accounting for the largest share of prices at the pump.
Lobby group FairFuelUK called for an inquiry into petrol prices by the Office of Fair Trading and also demanded a 3p cut in fuel duty.
Quentin Willson of FairFuelUK said: "We can't have a posse of speculative operators, led by the big banks, playing games with our financial future.
"The recession in 2007/08 began when the supply chain buckled under the weight of the 145-dollar barrel. We simply cannot ever allow that to happen again.
"In our opinion, the sooner we have legislation to stop opportunistic oil speculation by non-physical trading activity, the better.''
RAC Foundation director Professor Stephen Glaister said: "It is encouraging that Mr Alexander shares the concerns of the nation's drivers but in a way he is passing the buck.
"The biggest driver of pump prices remains the Government. Well over 60% of the price is tax. And that share could rise sharply with the reintroduction of the fuel duty escalator.
"Though the Chancellor has said he will freeze fuel duty until the election, he has also committed to hikes in duty above the rate of inflation if the oil price falls to 75 dollars a barrel. Which is it to be?''
AA president Edmund King welcomed the Government move, but said: "They themselves could do more.
"First, policies to help strengthen the pound by just 10 cents against the dollar would double the potential for a 2p-a-litre fall in the price of petrol to 4p.
"Secondly, the Government's failure to introduce fuel price transparency, showing the relationship between oil, wholesale and pump prices, has helped no one. Consumers can't see if they are paying a fair price for their fuel and retailers are less able to defend themselves against claims of profiteering.''
Mr King went on: "The Treasury's Chief Secretary, as a rural Scottish MP who once took on a supermarket giant to get fairer prices in his constituency, will also understand the need to encourage fuel retailers in small rural towns of 10,000-15,000 to pass on price cuts more quickly.
"Lower pump prices also expose more fully the burden of fuel taxation, currently around 65% of the cost of a litre of petrol. The Government has undertaken to freeze fuel duty until the election, but any political party that advocates a fuel duty increase afterwards will suffer a backlash - such has been the trauma for families and businesses of pump price spikes from 2011 through to last year.''
Shadow chief secretary to the Treasury Chris Leslie said: "Of course it's right that drivers should benefit from falling oil prices with lower prices at the pumps.
"But since 2011 people have paid 3p more on every litre of petrol because the Lib Dems broke their promise and backed the Tories in raising VAT.''