The Problem:
When it comes to the cost of fuel there are many issues that cause the price to increase in the manner we have seen over the last year. The main factors that affect the price we pay at pumps are: the price of oil, the profits made by petrol companies, and the fuel duty we pay to the government. Over the last year all three of these elements have contributed to the increased price of petrol.
The price of oil is at an all time high with pricing reaching $135a barrel, which is more than double the trading price just a year ago. There are fears this price could even continue to rise to up to $200 a barrel by the end of the year. This stark increase in oil price does directly correlate to the amount of money we end up paying at the pump; across the country petrol prices have reached staggering highs- with prices averaging 114p per litre, but this figure too continues to rise.
But if this is the only problem then how is it the case that oil companies, such as BP and Royal Dutch Shell are still announcing record profits? Amidst the hiked prices and extortionate price of oil these companies have announced record profits of £7bn quarterly. This inherently means that the oil companies are not being hit by the rise in oil prices as starkly as we, the consumers, are. Therefore the high prices we pay at the pumps cannot solely be due to the increased price of crude oil.
Added to this is the fact that we pay the highest levy of fuel tax in Europe. When it is considered that before fuel duty a litre of diesel would (at present prices) cost 48.8p a litre, yet when the 58 per cent tax is added it cost 116.6p a litre it is possible to see why people protest at the fuel tax that we pay. In fact, in the UK we pay a higher rate of fuel tax than any other European country.
So what impact is the price of oil having across the world?
The impact:
The impact of the oil crisis that has at least in part led to the extortionate price of fuel we are currently seeing is having devastating consequences around the globe; In the United States a four day week has been introduced in some parts to reduce fuel consumption, and in China fuel rationing has been introduced in order to cut demand.
In the UK the price of oil has affected many aspects of people’s day to day lives; it is estimated that 4 million people live in what is called ‘fuel poverty’ where more that 10% of their income is spent on essential fuel bills such as heating and electricity. Hauliers have protested over the proposed 2p increase in fuel tax, maintaining that it will have a significant detrimental affect on their livelihoods.
Transportation is vital in most industries; hauliers being the primary group affected, but many sales based industries are also hit by increased fuel prices, as well as small businesses who need to transport their goods or services to their clients. These small businesses are really suffering because, despite having to pay considerably more in fuel to get their products or services to their customers, due to of the credit crunch and increased price of fuel and food they do not feel they can pass this increase on to their customers. This means that profits are down at a time when it is costing more than ever to even just keep a small business ticking over.
Many people make a necessary commute to work each day and for some this is becoming an extreme financial hardship. A close friend of mine has even rejected a potential job offer due to the price of the commute outweighing the benefits of the promotion. As it is looking increasingly likely that there will not be a dramatic cut in fuel prices people have to make decisions accordingly.
There is little we can do with regards to the price of fuel; the global economy is such that this rise is inevitable; the supply of oil is decreasing as demand for oil increases. This will undoubtedly lead to oil becoming more expensive and this will have a knock on effect to fuel prices. However, decreasing the amount you rely on fossil fuels for your transportation not only means you will save money, but it will also be beneficial for the environment. Some even argue that this price hike is just what we need to reconsider our reliance on our fossil fuelled vehicles. So what can we do?
How to reduce your petrol costs, and save the planet!
The most simple and easy way to reduce the amount of money you are spending at the petrol station is to reduce your reliance on your car. Walking and cycling are both excellent means of travelling short distances that require no expenditure (apart from an initial outlay in the instance of cycling). Not only will walking or cycling to work reduce your fuel bill and your carbon footprint, you will also be exercising, which is fantastic for your health!
Public transport is another method to avoid fuel costs associated with driving; whilst it is sometimes is expensive to use public transport, it is gaining value as we try to reduce our carbon emissions and our own fuel bills.
Car share schemes are also becoming increasingly popular across the country- with many councils even now providing designated ‘car share lanes’ for those drivers who are aiming to cut pollution and congestion by sharing their cars with their co-workers. Car sharing not only reduces the amount you spend on petrol it also cuts your carbon emissions and eases congestions on our roads. Added to this the psychological benefit of not having the stressful drive to work each day, and the social benefit involved in car sharing and it is most definitely a positive plan from all angles!
For some, however, there is very little choice other than to get in the car to travel to work. If this includes you or your family then all is not lost- there are still some ways to reduce the amount of money you spend at the pump each week.
There are websites, such as www.petrolprices.com that will help you locate the cheapest petrol prices in your area, as well as the most expensive! In London the difference between two petrol stations could be as much as 13p a litre- that equates to a £5 difference to fill an average tank. Over the course of a year savings such as that will really add up!
Another method to save money at the pumps, or at least to earn some money back, is by joining a reward or loyalty scheme with a specific brand of petrol, Most major petrol companies, such as Shell, Esso and BP all offer loyalty schemes to their customers; these work on the basis that you are awarded points every time you shop their and that these points can then be redeemed off further purchases.
Another way to earn money from the petrol you buy is to use a credit card that has a cash back facility- these can earn you up to 5 percent cash back on all purchases (in the first six months). You must be sure to clear the balance each month though or you could end up seriously out of pocket!
The surest way to reduce the amount of money you spend on petrol is to use your car less. Environmentally this has to be a positive thing; people using their cars less creates less carbon emissions.
Using the environment, however, as a means to increase fuel tax when people are already being forced out of business and struggle to get by in their day to day lives is arguable, and taxing what is a necessary commodity to many is a highly questionable action on the government’s behalf.With oil prices sky high is now really the time to be increasing fuel tax even further, when we already pay the highest rate in Europe? The need to stop the general public’s reliance on their cars is clear; however I do not feel that forcing people in to ‘fuel poverty’ is the answer.
