Demand for oil is predicted to rise this year, pushing up the price of fuel in the UK – and drivers could be even worse off if the government raises tax.
The party looks to be over for UK motorists, with new research suggesting that the cost of fuel could soon be heading back up to last year’s levels.
A slump in the oil price at the end of summer 2014 drove the price of unleaded and diesel towards the £1-a-litre mark over the winter.
Prices creeping up
But the latest figures show that forecourt prices around Britain have been creeping up over the past four months as oil values start to rise again.
According to the RAC, the average price of a litre of petrol had risen to 117p by mid-June from its low point of 106p on 4 February this year.
A typical litre of diesel now costs around 121p, almost 7% above the February low of 113.29p.
These increases shadow a rise in the value of crude oil: a barrel is worth more than $62 at present, up from a low of $45 in January this year.
Rising global demand
But the worse news is that the rise in the oil price looks set to continue over the rest of the year.
A report issued last week by the International Energy Agency said that global demand for oil is predicted to rise “faster than previously expected” over the rest of 2015.
This is likely to push prices even higher.
The forecast of rising fuel costs has put pressure on Chancellor George Osborne to maintain his freeze on fuel duty in next month’s emergency Budget.
Will duty freeze end?
Duty was frozen for almost the whole of the last parliament, and during the election campaign the Conservatives indicated it would remain at its current level for the foreseeable future.
But recent reports have suggested that Osborne may in fact introduce a link between duty and inflation.
This would allow the government to claim that duty was frozen “in real terms” while boosting tax revenues.
But Howard Cox from the pressure group Fair Fuel UK said such a move would deal a devastating blow to millions of motorists.
‘Pure economic perversity’
“The Chancellor will be breaking his promise to 37 million drivers, the haulage industry and businesses by raising fuel duty even if, as rumoured, only by inflation,” Cox said.
“Frankly this alleged initiative is pure economic perversity totally out of character with traditional Conservative taxation philosophy.
“Our supporters will be very angry and feel betrayed by this new administration’s U-turn on taxing fuel.
“We will be campaigning hard to stop this foolhardiness.”
Sales down already
Figures from the AA showed that the rise in petrol prices since last winter has already had a dampening effect on forecourt sales.
The organisation said that HM Revenue & Customs figures showed petrol consumption in March had slumped to its lowest ever level.
This was despite the fact that fuel prices remained well below last year’s highs.
AA president Edmund King said: “Compared to May 2014, when petrol averaged around 130p and diesel 136p a litre, car-dependent families should be feeling much better off.
“However, as the AA has pointed out in the past, price surges at the pump and on the billboards trigger a negative response from drivers.”