posted 2 years ago

Diesel Tax At Highest Percentage Of Sale Price For 10 Years

Low oil prices benefit motorists but increase the percentage of tax paid on both diesel & petrol to multi-year highs.

Tax on petrol and diesel explained

Diesel buyers pay 74% of the price in tax which is the highest rate since 2004, the RAC Foundation said. Furthermore, tax on petrol also accounts for 74% which is the most since 2009. These percentages do not reflect tax rate hikes, but the low cost of oil.

Fuel Duty - for diesel and petrol, at least - is 57.95 pence per-litre, rather than a percentage of the sale price. Value Added Tax (VAT) is added to Duty at 20%, and to the price of the fuel itself.

The Director of the RAC Foundation, Steve Gooding, explained: "It is true motorists have benefited recently from falling oil prices”.

However, he continued: “The biggest driver of what we pay at the pumps is not OPEC (Organisation of the Petroleum Exporting Countries) or the big oil companies, but the Chancellor".

diesel Tax

"In the unlikely event fuel retailers wanted to give petrol and diesel away for free, they couldn't. Motorists would still pay 69.5p a litre on the forecourts: 57.95p in Fuel Duty and 11.6p VAT”.

“No apparent end” to low oil prices, RAC claimed

In January 2016, the RAC's Fuel Spokesman Simon Williams, said: “With no apparent end in sight to the free-falling price of oil, motorists can expect some really low fuel prices in 2016. Breaking through the pound per-litre price point for both petrol and diesel (most frequently at supermarkets) was clearly a welcome landmark.”

Motorists cover more miles thanks to low fuel prices

And it seems that low fuel prices encourage motorists to increasingly use their vehicles. They now travel a further 3.8 billion miles per-annum compared to 2014, Kwik Fit recently argued. 

Increased mileage

10% now make journeys they “might otherwise have avoided”, for example. Further, 8% have taken “days out or driving holidays” which were previously to expensive - and 5% “make longer journeys”. 

Fuel prices have an impact on vehicle sales too. 6% of motorists have, therefore, chosen models that might otherwise have been to expensive to run. Also, 5% now drive in a “less economical manner”.

Roger Griggs, Communications Director at Kwik Fit confirmed: “The lower fuel prices have obviously led to huge savings for many motorists, and also enabled them to use their cars more often.”

Why crude oil is cheap

The price of oil – as with every product – is defined, in part, by supply versus demand. In January 2016, HSBC Chief Executive Stuart Gulliver explained: "Major producers are currently delivering 2 to 2.5 million barrels per-day more than demand, so the question is how long they can continue to overproduce for at that level".