Some bad news today for people filling up the family car. The Sun says oil prices are set to hit “a new high”, causing misery for millions. The Daily Mail reports that Britain is still the 10th most expensive place in the world to buy petrol and diesel. Now, I accept that this Government has stepped up to the plate when it comes to cutting fuel duty. Petrol is now 10p per litre cheaper than Labour planned, thanks to George Osborne. The tax on fuel has been either frozen or reduced steadily for two years. In fact, the Chancellor has now done more to keep petrol prices down in this Parliament than Labour did in 13 years.
But why are prices at the pumps still so expensive? The answer — uncomfortable though it may be for some Conservatives — is that the oil market is neither transparent nor competitive. That is why I have founded the e-petition website PetrolPromise.com — powered by software from Right Angle — to call for an investigation into the UK oil market, after allegations of price-fixing at the pumps.
We have already uncovered a huge array of problems. Here are just five to get you started:
Pump prices are quick to rise, but slow to fall. From May to August last year, oil prices fell by 5.5%, but petrol and diesel stayed high, falling by just 1.5%. PetrolPromise.com has also published detailed evidence showing that oil firms are taking up to three weeks to pass on cheaper oil to motorists.
Some garages are more expensive than others. Even after the three-week delay for cheaper fuel, some local petrol stations, such as in my Harlow constituency, are still 5p more expensive than other nearby towns. This is not how a competitive market should behave.
The OFT are refusing to take action. The Office of Fair Trading has repeatedly said it will NOT investigate the oil market, despite major concerns raised by our campaign and national newspapers, and despite not having done so since 1998. Many forward-looking G20 nations like Germany, Austria, and America have now initiated fuel price regulation to crack down on uncompetitive behaviour by the oil companies, and also on rogue speculators who have been accused of fixing prices.
The EU is making the problem worse. As if motorists were not taxed enough already, the European Commission are, in their wisdom, now insisting on USSR-style quotas of bio-fuels, to be blended with petrol and diesel stocks. This will push up fuel prices by at least 3p per litre over the next decade — draining millions of pounds from the High Street. Read more here.
Oil prices could have been fixed in the same way as Libor. There have also been major concerns raised in an important article in the Telegraph, stating that oil prices could have been manipulated in the same way as Libor. If true, we need a full FSA investigation, and prosecutions of the worst offenders. This could potentially impact millions of people all around the country, especially those on low incomes who are worried about the price of petrol at the pumps.
However you look at it, oil companies and speculators have serious questions to answer. The Government has done its work; cutting or freezing fuel duty for two years. Now the oil market must bear its share of the responsibility as well.
Why does this matter? Because rip-off petrol prices are a tax on everything — getting to work, taking the kids to school, even bus prices. Fuel prices are trapping families on benefits, according to an academic study at the LSE, because they can’t afford to travel. In my hometown of Harlow, for example, the question is not whether you can you afford to have a car — but can you afford not to?
High petrol and diesel prices are also crushing the recovery. In 2011 ex-Tesco boss, Sir Terry Leahy, blamed the catastrophic slump in retail sales on the cost of fuel. He told The Sun:
“I don't think people fully appreciated what an oil shock we've had. Filling up the family car has gone up 70% in two years, causing what was a steady recovery to go sideways.”
Finally, we should remember that petrol prices are an issue of social justice — not just economic efficiency. Low-income workers are facing petrol poverty. According to figures released by the RAC, the average motorist in Harlow pays £1,700 a year just to fill up the family car. This is one tenth of an average local salary. The AA has also published research showing that we now spend more on fuel than we do on food. Lastly, fuel prices are regressive — hitting the poorest Brits twice as hard as the richest — according to the Office for National Statistics.
That is why, in addition to founding the PetrolPromise.com campaign, I have also asked the Backbench Business Committee for a Parliamentary debate on this issue. My motion, which asks for a Government enquiry into allegations of oil fraud and market manipulation, has now been signed by 67 MPs and is being supported by some Conservative MEPs as well, such as Vicky Ford, and is likely to be debated in the autumn. My hope is that this will put enough pressure on the Office of Fair Trading (who are independent, and cannot be instructed by Ministers) to look properly at allegations of uncompetitive behaviour by oil firms. If The Sun and Daily Mail are right, this work will soon be very urgent.