Call for tax rethink as cost of petrol set to hit record highs

PETROL prices will soar to a new record high at an average of £1.26 per litre by the end of the year, the leading fuel retail organisation has warned.

Research by the Retail Motor Industry Petrol (RMI Petrol), which represents two thirds of the UK's 9,000 petrol forecourts, has shown that prices could be up 8 per cent from the beginning of the year smashing the previous record of 1.21.

The predicted price is almost 50 per cent higher than the cost of a litre of petrol in January 2009 when it was 85p and yesterday there were warnings proposed tax rises in the new year will only send it further upwards.

The report, which also predicts an increase of 3 per cent by the end of this month, has once again sparked calls for the UK government to reconsider fuel tax rises which were confirmed in the emergency Budget.

The increase has been put down to the rise in crude oil prices, but there were warnings that the situation will get worse with a planned rise in VAT from 17.5 per cent to 20 per cent in January coupled with fuel duty rises of 1p a litre in October.

RMI Petrol chairman Brian Madderson said: "The rebound in crude oil pricing is disappointing but not entirely unexpected.

"It will further increase pressure on independent retailers who are fighting for survival, especially in rural areas, due to the double hit of falling volumes and tighter margins.

"This crude oil increase will feed through the supply chain and could result in prices going up by as much as 4p a litre in the next three weeks."

He went on: "We also need to remember that the coalition government did not cancel Labour's Budget commitment to raising fuel duty by 1p a litre from 1 October and a further 0.76p from 1 January, with both having VAT added.

"Then we have the coalition's emergency Budget proposal to increase VAT to 20 per cent from 4 January, so the outlook remains extremely difficult for motorists and retailers alike."

His concerns were shared by motorist organisations who predicted new record levels in the next six months on the back of tax rises.

RAC spokesman John Franklin said: "All these trends will add to inflationary pressures in our market and across the economy, threatening higher interest rates in the medium term."

The coalition government has been under pressure to introduce a fuel duty regulator and provide relief for people living in rural areas who end up paying more when petrol prices increase.

The issue has put Chief Treasury Secretary Danny Alexander in the firing line because he represents a Highlands seat.

Currently the government has agreed to pilot a scheme in Scotland to help tackle fuel costs in rural areas, but Western Isles MP Angus MacNeil insisted more needed to be done. He said: "It's a national scandal that, in an oil rich country like Scotland, we are paying the highest fuel prices in Europe.

"What Ministers in London forget is that for people in rural areas, a car is a necessity and not a luxury."