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Oil companies reap rewards of soaring fuel costs

An unhappy fuel tank Giant oil firms have profited the most from soaring fuel prices, new research shows.

Figures from the Office for National Statistics (ONS) indicate that the government’s share of every £1 spent on petrol and diesel has fallen sharply over the past decade, from 81p in 2001-2 to 66p in 2009-10, the period for which the most recent statistics are available.

The ONS said that the Treasury’s take from fuel sales was down proportionally because rises in petrol duty had not been as large as increases in the cost of oil over the last few years.

While fuel duty is up 26 per cent in the last 10 years, the average price of a litre of petrol has increased twice as quickly.

Calls to stop fresh duty rises

Irrespective of whether the oil industry or the state benefits more, drivers are being hammered by non-stop hikes in fuel costs.

MPs are now putting pressure on ministers to scrap planned increases in fuel duty, with the tax due to go up by 3p a litre in January, and a further 5p a litre in August next year.

This week, in response to an online petition supported by more than 100,000 motorists demanding lower taxes on fuel, MPs in the House of Commons told the coalition to rethink the 2012 rises.

Conservative MP Robert Halfon, who has led the calls to freeze duty, said: “Most people have no choice but to fill up their car or van with fuel. They depend on it for their daily existence.

"That is why we need a cut in fuel duty for millions of hard-working motorists and families.

“We need no new fuel taxes in this Parliament.

"The duty rises that are planned for January and August 2012 must be scrapped and the government needs to pressure the oil companies to keep prices down.”

Analysts say that the average family already spends around £700 a year on fuel tax.

New inflation measure needed

Also this week, AA president Edmund King wrote to Chancellor George Osborne asking him to take economic conditions into account when considering raising fuel tax.

The organisation also wants the government to use the Consumer Prices Index (CPI) of inflation rather than the Retail Prices Index (RPI) when setting fuel duty rises.

CPI does not include housing costs and is generally lower than RPI. The government has recently changed the inflation-linking of payments such as the state pension from RPI to CPI.

King wrote: “We were disappointed that the January fuel duty rise went ahead at a time of rising oil prices and higher VAT.

"The AA firmly believes that business and households should be given a break from the annual cycle of fuel duty increases.

“Motorists do not understand the logic of high fuel duty rises which further increase RPI and force demand down at a difficult time for family and business budgets which need mobility to stay afloat.

“Although we fully recognise the need to balance the books we also believe the time has come for activity to be stimulated through lower pump prices.”

Tough times for low-income families

The ONS figures also showed that the 20 per cent of households with the lowest incomes spent almost twice as much of their earnings – 3.5 per cent on average – on petrol and diesel duty than the richest 20 per cent, who spent just 1.8 per cent.

In absolute terms, however, the richest fifth do spend more on duty (£1,062 a year) than those in the bottom 20 per cent (£365).

The average household spent £677 on duty in 2009-10.

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Chris Torney

Chris Torney

Chris is the former personal finance editor at the Daily Express. He's been a journalist for more than 10 years and contributes to a wide range of finance and business titles.Read more from Chris