Petrol and diesel prices

Standard Note:

SN/SG/4712

Last updated:

28 January 2014

Author:

Paul Bolton

Section

Social & General Statistics

Road fuel prices have increased steadily since their recent lows in early 2009. Petrol prices
reached a record monthly high in May 2010, set new records in December 2010 and in each
of the following five months and broke these again in March and April 2012. Since then petrol
prices have been in the 129-139 pence per litre range. Diesel prices exceeded their summer
2008 highs in January 2011 and also set new highs in each of the next four months. New
records were set in February, March and April 2012. Prices fell by 10-11 pence per litre over
summer 2012 and have been in the 137-145 pence per litre range since then. The most
recent monthly average prices were 131 pence per litre for petrol and 139 pence per litre for
diesel in December 2013
The price increases from late 2010 were as a consequence of rising oil prices, the weaker
pound and increases in duty and VAT. Higher fuel prices since early 2011 were caused by
higher oil prices following the political unrest in the Middle East and particularly the revolt in
Libya. Increasing tension between Iran and the West pushed up oil prices again in early
2012. The threat of a fuel strike led to panic buying in some places in late March/early April
and coincided with the peak in prices, but prices also peaked around this time across
Europe. Oil prices fell by around $35 per barrel between April and June 2012, in large part
down to deteriorating Eurozone economic prospects and the knock on impact on the world
economy. These falls in prices were soon reversed and most of the earlier cuts in road fuel
prices were been reversed. Petrol and diesel prices have been relatively stable over the last
year. Duty rates have not changes and variations in fuel prices have been mainly due to the
impact on oil prices of political tension over the Middle East and changing world economic
prospects.

This information is provided to Members of Parliament in support of their parliamentary duties and is not intended to
address the specific circumstances of any particular individual. It should not be relied upon as being up to date; the law or
policies may have changed since it was last updated; and it should not be relied upon as legal or professional advice or as
a substitute for it. A suitably qualified professional should be consulted if specific advice or information is required.
This information is provided subject to our general terms and conditions which are available online or may be provided on
request in hard copy. Authors are available to discuss the content of this briefing with Members and their staff, but not with
the general public.

Typical retail price of premium unleaded petrol and diesel,

150

pence per litre

140
Petrol

130

Diesel

120
110
100
90
80

70
60
50
40
30
20
10

0
Jan-89

Jan-91

Jan-93

Jan-95

Jan-97

Jan-99

Jan-01

Jan-03

Jan-05

Jan-07

Jan-09

Jan-11

Jan-13

Source: Quarterly energy prices, DECC. Table 4.1.1

This note looks at trends in the price of petrol and diesel at the pump and before tax,
possible reasons for the gap in prices between the two fuels and compares prices and taxes
in different countries.
Trends in the pump and pre-tax price of road fuel and other petroleum products are given in
DECCs Quarterly energy prices publication. The AAs Fuel Price Reports has daily national
average prices. www.petrolprices.com gives daily average prices and local figures. The
Hydrocarbon Oils Bulletin from HMRC includes details of changes in duty rates and
revenues. The European Commissions Oil Bulletin gives a weekly comparison of pump and
pre-tax prices of fuels across the EU. The International Energy Agencys Monthly Energy
Prices shows trends in fuel prices for the largest OECD economies. Their Oil Market Report
gives background to changes in oil and product prices. Readers may also find the following
standard notes useful: Oil prices and Energy price rises and their impact on demand.
A new appendix to this note looks at the real cost of petrol since 1920 and the real value of
duty and VAT per litre. Prices in April 2012 were just above their earlier post second world
war high in real terms -set during the Suez crisis- but still below the real prices charged in
1920 when petrol pumps were first introduced. The total tax on a litre of petrol peaked in
summer 2000; the latest rate is just over 10% below this peak.
At the end of January the Office of Fair Trading published a report on competition in the UK
road fuel market. UK petrol and diesel sector. An OFT Call for Information. This looked at
various different aspects of the market including the impact of increased market share of the
big four supermarkets, prices differences between neighbouring towns and urban and rural
areas, the ability of independents to compete fairly and whether retail prices are quicker to
respond to wholesale price rises than price falls. Overall the report concluded that
competition in the sector is working well, although they did highlight the lack of pricing
information on motorway service stations as a concern and they did not rule out taking action
in specific local areas if there is evidence of anti-competitive behaviour.

Contents
1

Trends in pump prices

Trends in pre-tax prices

1.1

Oil prices

Why were late 2008 falls in oil prices not matched by falls in road fuel prices?

Tax

2.1

Pre-Budget Report 2008 VAT cut and duty increase

2.2

Plans for duty increases under the last Government

2.3

Changes to duty and VAT under the current Government

International comparisons

Why did diesel become so much more expensive than petrol?

10

Diverging trends in demand

11

Impact at the refinery during peak prices

12

Changes in the impact at the refinery since 2008

12

Why dont refineries simply produce more of the fuel in most demand?

13

Reference Tables

14

Appendix I Historical pump prices

16

Retail price trends

17

Duty and VAT trends

17

Appendix II -Prices across the EU from the mid-1990s

21

Trends in pump prices

The
appended
Table 1
summarises monthly fuel price
data from 1989 onwards. The
chart opposite looks at trends in
pump prices over this time.
Trends for petrol and diesel
were broadly similar over this
period differences are looked
at in the next section. While
there were regular peaks and
troughs, most of the 1990s was
characterised by a consistent
long
term
increase
that
averaged around 2.7 pence per
litre each year.

Typical retail price of premium unleaded petrol and diesel,

150

pence per litre

140

Petrol

130

Diesel

120
110

100
90
80
70

60
50
40
30
20
10
0
Jan-89

Jan-91

Jan-93

Jan-95

Jan-97

Jan-99

Jan-01

Jan-03

Jan-05

Jan-07

Jan-09

Jan-11

Jan-13

Source: Quarterly energy prices, DECC. Table 4.1.1

Prices increased at a faster rate in late 1999 and 2000 which led to the September 2000 fuel
protests when petrol and diesel were an average of 80.2 and 82.3 pence per litre
respectively. Prices subsequently fell back to around 75 pence per litre in 2002. The spike
that immediately followed the invasion of Iraq was short lived; petrol and diesel prices were
76 and 78 pence per litre respectively at the end of 2003. Price spikes have tended to be
sharper in recent years. Prices fell in early 2007 and February 2007 prices were broadly
consistent with the long-term price rises seen in the 1990s. However, early 2008 saw the
fastest period of price increases of recent decades and typical retail prices at mid-July 2008
were 119.4 pence per litre for petrol and 132.9 pence per litre for diesel. Prices fell back
sharply over the second half of 2008, but, apart from summer 2010, have increased in nearly
every subsequent month. The mid-May 2011 price of 136.7 pence for a litre of unleaded
petrol was the highest cash price ever until the March 2012 figure of 137.9 per litre. The
141.5 pence for a litre of diesel in May 2011 was also a cash record. It was exceeded in
February 2012 and again in March 2012 when the average price was 145.1 pence per litre.
Both prices peaked in April 2012; 141.7 and 147.8 pence per litre for petrol and diesel
respectively. Prices fell soon afterwards and subsequent increases have been short-lived
and have not yet taken levels back to the April 2012 highs. Mid-December 2013 averages
were 130.8 pence per litre for petrol and 138.6 for diesel. The price rises since 2010 have
taken prices above the long-term trend increases. In the past prices have returned back to
the long term trend line, but there is no guarantee that
this will happen in the future.
The table opposite gives the latest weekly fuel prices.
The latest data show a gradual decline in prices of
both fuels over the past six weeks

Average UK fuel prices in the last six weeks

pence per litre

23 Dec 2013
30 Dec 2013
06 Jan 2014
13 Jan 2014
20 Jan 2014
27 Jan 2014

Petrol

Diesel

130.1
130.0
130.3
130.4
129.4
129.0

138.2
138.0
138.1
138.3
137.2
136.9

So urce: Quarterly energy prices, DECC Table 4.1.1

Trends in pre-tax prices

Pre-tax price of premium unleaded petrol and diesel,

Table 1 also includes pre-tax
pence per litre
price figures and these are
Petrol
illustrated opposite. This helps
Diesel
to identify the impact of duty
increases and those of higher
oil prices. Again there were
numerous peaks and troughs,
but the trend in pre-tax prices of
both fuels was static or
downwards for much of the
1990s. The increases shown in
the first chart were driven by
Jan-90
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
Jan-12
increases in duty the soSource: Quarterly energy prices, DECC.
called road fuel duty escalator.
It is also clear that much of the
trend in pump prices was driven by changes in the pre-tax prices, rather than in fuel duty.
The lows seen in early 1999 were 9.4 pence per litre for petrol and 9.3 pence per litre for
diesel. There were new record high pre-tax prices for both fuels in each month from
December 2007 to July 2008, followed by sharp falls in late 2008. The April 2012 pre-tax
price of petrol was 60.5 pence per litre; 18% above the July 2008 level. The pre-tax price of
diesel marginally exceeded its July 2008 high when it reached 63.0 pence per litre in
March 2012. It increased to 65.4 pence per litre in April 2012. Pre-tax prices were relatively
stable for much of 2013.

1.1

65
60
55
50
45
40
35
30
25
20
15
10
5
0

Oil prices

The chart opposite plots index

values for oil prices and the
pre-tax prices of road fuel. This
shows a general close match in
trends. Oil prices tend to be
more volatile and road fuel
prices tend to lag behind oil
price trends.

Index of pre-tax fuel prices and oil acquired by refineries,

2005=100
250
Petrol
Oil

200

Diesel

150

100

Crude oil prices are not the only

element of the pre-tax price
which also includes refinery
costs/profits, transport and
marketing. DECC does not
routinely publish data on the
breakdown
between
these
elements.

50

0
Jan-90

Jan-92

Jan-94

Jan-96

Jan-98

Jan-00

Jan-02

Jan-04

Jan-06

Jan-08

Jan-10

Jan-12

Source: Quarterly energy prices, DECC.

Why were late 2008 falls in oil prices not matched by falls in road fuel prices?
Headline oil prices fell from July 2008 for much of the rest of the year, but on first glance
these falls have not been mirrored in petrol and diesel prices. The accusation is that oil
companies and/or fuel retailers have not passed on these savings. There are a few
alternative explanations which help to explain some of the variation in trends.

First, much of the retail price of these fuels in made up of duty. Variations in oil price affect
the pre-tax portion only; therefore we would expect a smaller percentage change in retail
prices.
Second, the US Dollar has become stronger since the decline in oil prices started. This
means that the fall in oil prices when quoted in Sterling is smaller than the headline Dollar
figures. Daily prices quoted in the press are usually the forward month price the price for
delivery of oil in the following month. Therefore we might expect some lag between falls in
daily oil prices and price cuts on the forecourt. Timing can be particularly important with the
high level of price volatility seen recently.
The recent OFT report UK petrol and diesel sector. An OFT Call for Information looked in
general terms at claims that forecourt prices rise more rapidly following a wholesale price rise
than they do after a wholesale price fall; co-called rocket and feather pricing where prices are
said to rise like a rocket but fall like a feather. In summary the report said:1
Our analysis of the relationship between retail and wholesale prices at a national, local
area and site level, as well as the relationship between crude oil prices and wholesale
prices at a national level, found very limited evidence of rocket and feather pricing. This
result is consistent with evidence that we gathered from market participants, which
suggests that rocket and feather pricing is unlikely to occur.
Our econometric analysis sought to identify the speed with which changes in upstream
prices changes are passed through the supply chain and then test whether upstream
price increases are passed through more quickly than price decreases. If the speed of
pass through is faster for a price increase than for a decrease, then rocket and feather
pricing is found to occur. We used data covering the period January 2000 to August
2012 for the national analysis and the period November 2011 to October 2012 for the
local area and site level analysis.
While our overall findings for local areas are consistent with the national and site level
analysis, there were a few instances where the speed of pass-through was statistically
significantly different for price rises compared with price falls. However, we do not put
much weight on these instances because, among the small number of areas where
some evidence of asymmetry was found for petrol prices, no area displayed a
consistent pattern of different pass-through speed. Similarly, for the small number of
areas where we found asymmetry for diesel prices, no area displayed a consistent
pattern of different pass-through speed and the limited evidence of asymmetry that we
did find was consistent with prices that 'feather' up and 'rocket' down.

Tax

The data in Table 1 show how the total tax take from road fuel has change over time. Falling
fuel prices and the fuel duty escalator saw the tax take rise during much of the 1990s to a
peak of 86% in early 1999. The relatively small increases in duty between 2001 and 2008
and higher oil prices saw the tax take fall to 57% (petrol) and 53% (diesel) in July 2008. Both
rates increased as prices fell in late 2008 and early 2009; petrol to 74% and diesel to 66%.
This trend has since been reversed mainly due to higher prices- and the -December 2013
tax take was 61% for petrol and 58% for diesel.

UK petrol and diesel sector. An OFT Call for Information, OFT January 2013. paras 1.19-1.21

Changes in duty rates in cash

terms are given in the first chart
opposite. Again this clearly
illustrates the increases during
the 1990s due to the operation
of the road fuel duty escalator.
VAT is levied on the post-duty
price and hence on the duty
and the pre-tax price. Duty
rates on each fuel have been
identical or very close for the
period shown so any difference
in total VAT per litre is
connected to the pre-tax price.

Main road fuel duty rates, pence per litre

60

60
Petrol
Diesel

50

50

40

40

30

30

20

20

10

10

0
1989

0
1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

Source: Hydrocarbon oils bulletin, HMRC

Main petrol duty rates in real terms

Duty rates were cut or frozen

70
pence per litre in 2012 prices
for around six years from early
60
2000.
The second chart
opposite plots the rate for petrol
50
in real terms. It shows a gradual
40
cut in the real rate of duty from
2000 to late 2008. By autumn
30
2008 duty was lower than it had
20
been in real terms since
autumn 1996. Subsequent duty
10
increases and lower/negative
0
levels of inflation caused a
1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Source: Hydrocarbon oils bulletin, HMRC; ONS series CHAW
sharp rise in the real duty rate
in 2009. Duty increases in 2010
and January 2011 were nearly matched by higher inflation, so the real level remained
broadly constant. The Budget 2011 duty cut took real rates down to early-2009 levels and the
subsequent freezing of duty has meant its real value is currently the lowest since late-2008.
Pre-tax price increases add to the VAT on a litre of fuel. The real value of the total tax on a
litre of petrol fell by around one-sixth between summer 2000 and summer 2007, before
increasing back to almost the summer 2011 peak in early 2011. With no duty increases since
then the real value has fallen and the July 2013 level was around 8% below this recent peak.
2.1

Pre-Budget Report 2008 VAT cut and duty increase

VAT was cut from 17.5% to 15% in the 2008 Pre-Budget Report and petrol and diesel duty
were increased by 2 pence per litre. It was announced that:2
the cost of petrol and diesel will fall for private motorists who should see no increase
in the price they pay at the pump this year from this measure.

The net effect of these changes depends on the underlying pre-tax price of petrol and diesel
as these determine VAT yield per litre. Higher pre-tax prices increase the VAT yield and vice
versa. The net effect of the cut in VAT and 2 pence increase in duty was to slightly increase
the tax on a litre of petrol in early 2008, but as prices increased the net effect was to cut it for
the rest of the year by an average of 0.25 pence per litre. The net effect on diesel was a
small cut for the whole year. The VAT cut was temporary; it returned to 17.5% at the end of
2

Facing global challenges: supporting people through difficult times, Pre-Budget Report press notice 24
November 2009, HM Treasury.

70
60
50
40
30
20
10
0

the year. The duty increase was not reversed there were further increases in April and
September 2009.
2.2

Plans for duty increases under the last Government

Following the 2009 Budget duty rates increased by 2 pence per litre on 1 September 2009
and was announced that they would increase by a further 1 penny a litre in real terms in each
year each April from 2010 to 2013.3 In effect a return to the fuel duty escalator, albeit one
which moves more slowly than the 1990s version. Budget 2010 announced that the 2010
increase would be staged: one penny increase in April, one penny in October and
0.76 pence in January 2011.4
2.3

Changes to duty and VAT under the current Government

The October 2010 and January 2011 increases were implemented by the current
Government under plans inherited from the last Government. VAT increased from 17.5% to
20% on 2 January 2011. In Budget 2011 the Chancellor announced he would abolish the fuel
duty escalator and instead cut duty by one penny per litre on 23 March. He also announced a
fair fuel stabiliser where duty rises in line RPI inflation when oil prices are high, but
increases by RPI plus one pence per litre when they are low for a sustained period. The
suggested trigger price is $75 per barrel, but the Government will seek views of interested
parties. This meant that duty was expected to rise by 3.02 pence per litre (RPI) on 1 January
2012. The 2012-13 price rise was due to be implemented on 1 August 2012.5 Fuel duty rises
have not kept pace with RPI inflation over much of the past decade, as illustrated in the chart
on the previous page.
In the Autumn Statement 2011 the Chancellor announced that the duty increase that was
due in January 2012 would be deferred until 1 August 2012. The inflation increase which was
due on 1 August 2012, thought to be worth 1.92 pence per litre, was cancelled.6
Budget 2012 made no change to the existing plan to increase duty on petrol and diesel by
3.02 pence per litre on 1 August 2012. However, the Chancellor announced on 26 June 2012
that this duty increase would be delayed again, until 1 January 2013.7 This increase was
cancelled in the Autumn Statement 2012 and the planned 2013-14 put back from April to
September 2013.8
Budget 2013 cancelled the September 2013 duty increase.9 If fuel duty does increase in
September 2014 it would mean that duty had not increased for three years and nine months,
the longest such period since the late 1960s/early 1970s (during which VAT was first
levied).10 In the Autumn Statement 2013 the Chancellor announced that fuel duty would be
frozen for the rest of the Parliament (to 2015).11
Budget 2011 also announced the Governments formal request to the European Commission
for rural fuel duty rebate pilot. This could cut duty by five pence per litre in the Inner and
Outer Hebrides, the Northern Isles, the islands in the Clyde and the Isles of Scilly.

3
4
5
6
7
8
9
10
11

Budget 2009 Building Britains future, HM Treasury

Budget 2010 Securing the recovery, HM Treasury (March 2010)
Budget 2011, HM Treasury
Autumn statement 2011, HM Treasury
HM Treasury press notice 26 June 2012, Chancellor announces support for motorists
Autumn statement 2012, HM Treasury
Budget 2013, HM Treasury
See the table in Appendix I for sources
Autumn Statement 2013, HM Treasury

International comparisons

Table 2 at the end of this note compares diesel and petrol prices and taxes for all EU
member states. The charts below illustrate this information for early-September 2013.
Unleaded petrol pump prices in the EU

Diesel pump prices in the EU

20 January 2014

20 January 2014

ROU
POL
EST
LUX
LVA
CZE
BGR
LTU
HUN
AUT
CRO
ESP
CYP
MLT
SVK
SVN
FRA
BEL
DEU
PRT
IRL
GBR
SWE
FIN
DNK
GRC
NLD
ITA

LUX
POL
LVA
ROU
CRO
LTU
AUT
FRA
EST
CZE
BEL
ESP
PRT
MLT
BGR
SVK
GRC
SVN
DEU
HUN
NLD
CYP
IRL
DNK
FIN
SWE
ITA
GBR

taxes and duties

pre-tax price

25

50

75

100

125

150

taxes and duties

pre-tax price

Source: EU Oil Bulletin

25

50

75

100

125

150

Source: EU Oil Bulletin

The UKs petrol price on 20 January 2013 was the seventh highest in the EU. Over the past
few years the UK has moved down this list from first place as rates of duty have increased in
other member states, rising oil prices have shifted the balance from taxes to the pre-tax price
and the value of Sterling has been generally weaker against the Euro. During much of 2012
and late 2013 the UK moved back up this list in large part due to the relative weakness of the
Euro. New Year duty rises in some EU states have pushed the UKs ranking to one of the
lowest for many years. At the same time the UKs diesel prices were the most expensive in
the EU. The price of diesel in the UK was clearly the highest in the EU for many years, but
the gap to the next highest countries fell substantially over time-again due to duty increases
elsewhere, higher pre-tax prices and exchange rate movements. The Social Indicators article
Road Fuel Prices and Taxes Across the EU gives much more background on the subject.
Appendix II to this note extends the EU time series data.

UK diesel duty rates are still considerably

higher than elsewhere in the EU. The chart
opposite gives recent duty rates for the
EU27. The UKs duty rate on petrol was
fourth highest, it had been the highest for
some years, but changes in the exchange
rate and increased duty rates elsewhere
have altered the situation. Differences in
diesel duty rates are starker. Every other
member state had lower duty rates for
diesel; the diesel discount was 30% or
more in some countries. The result was that
the diesel duty rate in the UK was 5.6 pence
per litre (11%) higher than any in any other
EU country and 23 pence (66%) above the
simple (unweighted) average for the other
27 members. Higher VAT rates in most
other EU countries mean that differences in
total tax on a litre of fuel are somewhat
smaller.

EU road fuel duty rates 02.09.2013

pence per litre
LTU
LUX
ROU
CRO
POL
GRC
LVA
PRT
ESP
HUN
EST
MLT
DNK
SVK
AUT
CYP
CZE
BEL
FRA
SVN
NLD
FIN
DEU
IRL
SWE
ITA
GBR

Petrol
Diesel

December 2013 petrol prices for the largest

0
10
20
30
40
50
60
Source: EU Oil Bulletin
OECD economies12 varied (in $US) from
$2.37 in Italy to $0.87 in the US. Diesel prices were highest in the UK at $2.27 and lowest in
the US at $1.03. Pre-tax prices varied between countries by around $0.20 per litre for petrol
and $0.10 per litre for diesel.13

Why did diesel become so much more expensive than petrol?

The current duty on diesel (57.95 pence per litre) is exactly the same as that on petrol. Duty
rates have been the same for the large majority of the last 18 years.14 Therefore the
difference in price is not due to tax, but is down to the difference in pre-tax prices. A number
of factors have pushed up the relative price of diesel over time, the most important of which
are thought to be the long term increase in demand for diesel and limited refining capacity.
The price gap virtually disappeared during much of 2009, but grew again in winter 2010/11
and in late 2011.
The earlier charts show that the underlying cost of diesel was less than petrol in the early
1990s. It routinely became more expensive from 1999 onwards and until recently the gap
had generally increased since. There is also some evidence in the large price variations
since 2001 that compared to petrol, diesel prices are sticky downwards when prices fall
they do not fall as much as those of petrol. This will be in part due to the fact that the
underlying increase in diesel prices has been greater, but also due to diesels seasonal
fluctuations this may also in part be because many of the large petrol price falls have been in
the winter months, when diesel prices tend to increase (relatively).

12
13
14

USA, UK, Japan, Germany, Italy, France, Spain and Canada

Oil Market Report January 2014, IEA
Hydrocarbon oils bulletin December 2011, HMRC

10

The chart opposite plots

Difference in the pre-tax price of diesel and petrol
12
-excess of diesel over petrol (pence /litre)
monthly price differentials since
10
January 1990. This helps to
8
illustrate the increase in the
6
scale of the price gap up to
4
2008. It also shows a seasonal
pattern in some years. Diesel is
2
a gasoil produced from the
0
same distillate of crude oil as
-2
heating oil. Therefore in the
-4
colder months when heating oil
-6
demand increases there is
-8
greater demand for this product
Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12
of the distillation process and Source: Quarterly energy prices, DECC
price responds to the increase
in demand.15 The seasonal pattern appears to have become stronger and/or clearer since
2010. The seasonal pattern in price gaps can also be affected by the increased demand for
petrol, in North America particularly, during the summer driving season.

12
10
8
6
4
2
0

-2
-4
-6
-8

The April to July 2008 price gaps increased when the past seasonal pattern suggested a fall.
Seasonal patterns can only explain a small part of the increase in the price to 2008.
Diverging trends in demand
Overall trends in road fuel use
Volume of motor fuel delivered in the UK, million litres
help to explain at least some of
Petrol Diesel
the relative price changes
shown above. In the UK petrol
consumption16 fell in each year
between 1998 and 2012, while
diesel consumption increased
in each year other than 2007
and 2008. The total drop in
petrol consumption since 1998
was
39%,
while
diesel
consumption rose by 42%.17
Trends are illustrated in the
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
chart opposite. Diesel became
Source: Digest of UK energy statistics 2013, DECC. Long term table 3.1.2.
more popular than petrol in
2005. In the early 1970s petrol consumption was three times greater than diesel
consumption.
Diesel/heating oil demand has been increasing at a faster rate than petrol demand over the
last decade across Europe and the world as a whole.18 The average annual rate of increase
in demand for diesel over the decade to 2010 was 2.7% for the EU, consumption of petrol fell
by 2.6% per year on average.19 The diesel growth rate in the UK in the decade to 2011 was
2.7%.20 Prices will have responded to these changes in demand (diesel up, petrol down,
15

16
17
18
19
20

The IEA has recently said that the impact of cold spells on OECD heating oil demand are often overstated and
they are in fact declining over time. Oil Market Report November 2011, OECD
Total quantity released for consumption
Digest of UK energy statistics 2013, DECC
Oil information 2007, IEA
EUROSTAT
Hydrocarbon oils bulletin May 2009, HMRC

11

40
35
30
25
20
15
10
5
0

relative to what they would have been with constant demand) and the patterns shown earlier
are consistent with this. The International Energy Agency has said that preferential diesel
taxes in Europe have helped to increase the demand for diesel.21
The US Energy Information Administration cited the worldwide increased demand for diesel
and other distillate fuels putting pressure on tight global refining capacity as the primary
reason for the higher price of diesel.22 Up to mid-2008 the increased demand for heating oil in
Europe and the Asia/Pacific region and continued strong demand from China have all added
to the demand for diesel/heating oil and pushed up prices and increased the diesel/petrol
price differential.
Impact at the refinery during peak prices
Increased demand and limited supply is reflected in refinery margins the difference between
the cost of a barrel of refined product and the cost of crude. This is where there large
majority of the price differential occurs. In spring 2008 the average margin in North West
Europe for ultra low sulphur diesel peaked at just over $40 per barrel23, compared around $5
per barrel for ultra low sulphur petrol.24 This gap represents a price differential of just over
11 pence per litre (around 13 pence per litre after VAT), although margins are volatile and
the resulting gap varies daily. The refinery margin for diesel hit a number of new record
levels in spring and early summer 2008 and the differential has been counter to the normal
seasonal pattern which would see a fall from March/April.
The International Energy Agency has said that longer term increases in demand from Europe
and across the world (China especially) left Europe structurally short of diesel and gasoil
and hence refinery margins increased. Increasing demand for diesel was one of the key
demand factors that resulted in higher oil prices. Europe was importing diesel from
elsewhere, but this has had little impact on prices. Falling demand for petrol had left stocks
high and has a downward impact on its refinery margins. Even in the US, where petrol
demand was normally buoyant in the summer, petrol margins fell due to underlying lower
demand and an increase in ethanol in blends.25 The growing diesel/petrol differential was
increased by short term effects such as the industrial action at Grangemouth and high gasoil
demand from China, South Africa and Chile to meet shortfalls in power production.26 Wide
refinery margins are not simply higher refinery operating costs,27 but an obvious way in which
higher diesel demand, limited flexibility of supply and relatively low petrol demand feed
through to price differentials.
The fall in oil prices from July 2008 coincided with a fall in the margin for diesel as demand
fell and some new sources of supply came online. The high level of demand for diesel (and
jet fuel) has been one of the main factors behind such high oil prices.
Changes in the impact at the refinery since 2008
The margin between diesel and petrol continued to fall in early 2009 and in summer 2009 the
margin was greater for petrol a re-establishment of earlier seasonal patterns. This was

21
22
23
24
25
26
27

Oil Market Report November 2011, IEA

Diesel Fuel Prices: What Consumers Should Know, EIA
The difference between the price of a barrel of refined product and crude oil cracks to benchmark crude
Oil market report July 2008, IEA
ibid.
ibid. and earlier editions
The switch to lower sulphur content diesel (from 1997 onwards) will have increased diesel refining costs
although refining costs for basic diesel were lower than those for petrol.

12

largely due to strong export demand for petrol (to Africa, the Middle East and the US) and
relatively weak demand for distillates similar to diesel.28.
The margin for diesel has been greater since autumn 2009. It increased sharply in late
autumn 2011 at a time when the margin for petrol fell. The result was rising pump prices for
diesel and falling prices for petrol. The International Energy Agency said at the time that
recent trends reflect a number of different factors around the world, including higher than
expected demand for diesel for generation in China and Japan, ongoing increases in
demand for diesel from Europe and the US especially and weak petrol demand in both
markets. Longer term growth in emerging economies is expected to further expand demand
for diesel as are changes in fuel quality for shipping. The December 2013 difference in
margins in North West Europe explains around seven pence per litre difference in prices.29
Why dont refineries simply produce more of the fuel in most demand?
Oil refining produces a range of different petroleum products. If refineries are to respond to
high prices and increase their output of diesel/heating oil then output of the less profitable
products has to increase as well. This would further reduce the price/profitability of the lesser
demanded products such as heavy fuel oils. Therefore, in such a situation, to increase the
overall refining margin by a relatively small amount the margins for the individual in-demand
products need to increase by a much larger amount. These feed through to consumer prices
and, in this case, increase the gap between diesel and petrol prices. Economic theory would
suggest that in competitive markets the underlying changes in demand for different fuels
would send price signals to (potential) suppliers. The resulting shifts in supply would reduce
the price differentials. However, as explained above, the supply of all petroleum products is
closely linked; refineries cannot just leave the fuel oil market or enter the diesel market only.
Thus price differentials persist and grow.
According to the UK Petroleum Industry Association (UKPIA) refineries in the UK are
configured to meet historical patterns of demand which maximised petrol and heavy fuel oil.
The change in petrol/diesel demand was mentioned earlier. The demand for jet fuel also
increased strongly over time. The major fall in demand over the past few decades has been
in fuel oil which itself was largely due to the decline in heavy industry and its replacement by
natural gas for heating and power generation. Some of the surplus fuel oil has been further
refined to increase petrol and diesel output. The output of UK refineries does not match UK
demand and hence the UK imports diesel (mainly from Russia) and jet fuel (mainly from the
Middle East) and exports petrol and fuel oil. According to the UKPIA changing refinery
production to meet demand will require major investment. They also cite research which
predicts that past patterns (greater diesel and jet fuel demand and lower petrol demand) will
continue and be exacerbated by increased biofuel production and lower international sulphur
limits on shipping from 2020 which will cause a shift from fuel oil to gas oil.30

28
29
30

Oil market report June 2009, IEA

Oil market report January 2014, IEA
Statistical review 2008, UKPIA

13

Reference Tables

Table 1
Typical UK retail prices, pre-tax prices and tax take for premium unleaded petrol and diesel
pence per litre

Premium unleaded petrol

Diesel

retail

pre-tax

% tax take

retail

pre-tax

% tax take

Jan 1990
Jan 1991
Jan 1992
Jan 1993
Jan 1994

38.4
42.1
43.4
47.1
50.8

15.7
17.2
14.6
16.7
14.9

59%
59%
66%
65%
71%

39.2
43.3
43.2
47.1
51.7

16.8
15.8
14.9
17.2
16.3

57%
64%
66%
63%
68%

Jan 1995
Jan 1996
Jan 1997
Jan 1998
Jan 1999

53.4
55.9
61.1
63.1
62.9

14.2
13.3
15.1
13.5
9.5

74%
76%
75%
79%
85%

54.1
57.4
62.0
63.3
64.0

14.8
14.6
15.9
13.6
9.4

73%
75%
74%
78%
85%

Jan 2000
Jan 2001
Jan 2002
Jan 2003
Jan 2004

75.4
76.9
69.9
75.0
76.2

16.9
16.6
13.7
18.0
17.8

78%
78%
80%
76%
77%

77.8
81.6
74.7
76.4
77.9

19.0
20.7
17.7
19.2
19.2

76%
75%
76%
75%
75%

Jan 2005
Jan 2006
Jan 2007
Jan 2008
Jan 2009

79.0
88.8
86.9
103.7
86.3

20.1
28.5
25.6
37.9
22.7

75%
68%
71%
63%
74%

84.2
93.1
91.4
108.7
98.7

24.5
32.1
29.5
42.2
33.5

71%
66%
68%
61%
66%

Jan 2010
Jan 2011
Jan 2012

111.5
127.5
132.9

38.7
47.3
52.8

65%
63%
60%

113.3
132.1
141.3

40.2
51.1
59.8

64%
61%
58%

Jul 2013
Aug 2013
Sep 2013
Oct 2013
Nov 2013
Dec 2013

134.7
136.9
137.2
131.5
129.7
130.8

54.3
56.1
56.4
51.6
50.2
51.0

60%
59%
59%
61%
61%
61%

139.6
141.6
142.3
138.8
137.3
138.6

58.4
60.1
60.7
57.7
56.5
57.5

58%
58%
57%
58%
59%
58%

So urce: Quarterly energy prices, DECC Table 4.1.1

14

Table 2

Average Petrol (a) and Diesel Prices and Taxes in EU member states
20 January 2014
Petrol
Pump
price

Diesel

Taxes and duties

Pre-tax
price

Pump
price

Taxes and duties

Pre-tax
price

per litre

per litre

% of pump
price

per litre

per litre

per litre

% of pump
price

per litre

BEL
BGR
CYP
CZE
DNK

1.24
1.09
1.16
1.09
1.35

0.72
0.48
0.59
0.57
0.77

58%
44%
51%
53%
57%

0.52
0.61
0.57
0.51
0.58

1.10
1.12
1.21
1.10
1.22

0.54
0.46
0.57
0.52
0.58

49%
41%
48%
47%
48%

0.56
0.66
0.63
0.58
0.64

DEU
GRC
ESP
EST
FRA

1.26
1.36
1.15
1.06
1.24

0.74
0.82
0.58
0.53
0.71

59%
60%
51%
50%
58%

0.52
0.54
0.56
0.53
0.52

1.14
1.13
1.10
1.09
1.09

0.57
0.50
0.50
0.51
0.55

50%
44%
45%
46%
50%

0.57
0.64
0.61
0.59
0.55

HUN
IRL
ITA
LVA
LTU

1.10
1.27
1.42
1.07
1.10

0.57
0.74
0.86
0.54
0.55

52%
58%
60%
51%
50%

0.53
0.53
0.56
0.53
0.55

1.15
1.22
1.36
1.06
1.07

0.55
0.64
0.75
0.47
0.46

48%
52%
56%
45%
43%

0.59
0.58
0.60
0.59
0.62

LUX
MLT
NLD
AUT
POL

1.06
1.19
1.39
1.10
1.05

0.52
0.60
0.88
0.59
0.53

49%
51%
63%
54%
50%

0.54
0.59
0.52
0.51
0.52

0.99
1.12
1.18
1.09
1.06

0.41
0.52
0.61
0.52
0.49

41%
46%
51%
48%
46%

0.58
0.60
0.57
0.57
0.57

PRT
ROU
SVK
SVN
FIN

1.27
1.01
1.19
1.20
1.33

0.72
0.51
0.67
0.67
0.77

57%
50%
56%
56%
58%

0.55
0.51
0.52
0.53
0.56

1.12
1.07
1.13
1.14
1.26

0.51
0.49
0.52
0.57
0.63

46%
46%
46%
50%
50%

0.61
0.58
0.61
0.56
0.64

SWE
GBR

1.31
1.29

0.79
0.80

60%
61%

0.52
0.50

1.31
1.37

0.72
0.81

55%
59%

0.60
0.56

No tes:
P rices co nverted to sterling o n basis o f exchange rates o n date listed
Co mpariso ns between co untries require care because o f differences in pro duct
quality, marketing practices, market structure sales o f o ther types o f fuel.
(a) Super unleaded petro l (Euro super 95)
So urce:

EU Oil B ulletin

15

Appendix I Historical pump prices

The first hand operated petrol pumps were introduced in Britain in 1920. Before then petrol
had been sold in cans. In the subsequent 90 years there have been numerous changes in
the quality/grade of petrol, its lead and sulphur content and how its price and distribution has
been controlled. This note does not attempt to describe these changes. If readers are
interested in changes in the retail market up to the mid-1960s they should look at Petrol: A
Report on the Supply of Petrol to Retailers in the United Kingdom which was produced by the
Monopolies Commission in 1965. Chapter 2 gives a description of the retail petrol market up
to that time.
Some of the major events and changes which affected petrol prices and sales are listed
below:31

January 1921 -removal of the consumer tax on petrol

April 1928 duty imposed on petrol

September 1939 Petroleum Board made up of UK suppliers became an executive body

working under Government direction. A single grade of petrol sold and rationing introduced.

1948 Petroleum Board ends, new zonal price system introduced and fixed prices become
maximum prices.

May 1950 rationing ends

February 1953 branded petrol returns and is sold in two grades

December 1956 Suez crises leads to rationing (to May 1957) and 40% increase in duty
(reduced in April 1957)

1967 star grading of petrol introduced

April to December 1974 First Oil Shock leads to maximum prices for petrol set by regulation.

1974 VAT introduced at 10%, later increased to a higher rate of 25% (to April 1976)

March 1989 unleaded/leaded duty differential increased to 2.7 pence per litre (15%)

1993 road fuel duty escalator introduced

September 2000 high duty/prices lead to protests, blockades of some refineries and
widespread shortages.

November 2000 cut in fuel duty and end of the escalator announced

August 2008 record oil prices lead to pump prices peaking at 120 pence per litre.

Early 2011 to present political unrest in the Middle East adds to underlying increase in oil
prices. These combine with the relatively weak value of Sterling, increases in duty and VAT to
give new record high cash prices in each of the first five months of 2011. Increasing tension
between Iran and the West pushes up prices in early 2012.

The charts later on in this section and the table at the end illustrate changes in the retail price
of a litre of petrol since 1920 and changes in its taxation. Prices were not allowed to freely
float and reflect market conditions for much of the early part of this period. They were either
set by agreement between petrol suppliers and retailers or, occasionally, set by the
Government. Prices were managed and price changes were relatively infrequent. The figures
given in the charts and tables are meant to give a general impression over time, not a
precise guide.
31

UK petrol prices (1902-2002) and diesel prices (1889-2002), Energy Institute; Petrol: A Report on the Supply
of Petrol to Retailers in the United Kingdom; Monopolies Commission 1965

16

The data are for occasional times (general changes in prices or taxes) up to 1973, quarterly
or more frequent to 1988 and monthly thereafter. Prices have been adjusted to 2012 levels
using single annual inflation estimates before 1948. This introduces a further element of
imprecision, especially when prices were rapidly changing in the early 1920s.

Retail price trends

The first chart on the following page gives real price trends for different grades of petrol from
1920 onwards. These are set alongside some of the major events related to petrol prices and
sales.
April 2012 prices were higher than the 2008 peak in real terms and above the peak which
followed the lifting of price in 1974/75. They were also very slightly above the peak during the
Suez crisis. The difference is around one percentage point which could be affected by the
adjustments for inflation. The April 2012 (and May 2011) real prices should therefore be seen
as broadly equivalent to those during the Suez crisis when petrol was rationed and duty was
increased by 40%.
The highest price on this series is the first one; April 1920. This was the first ex-pump price
and it is highly likely that then, as now, new technology initially comes at a higher price. After
this initial spike their wider adoption and the greater economies of large storage tanks will
have helped to reduce prices.
The lowest real pump prices in recent times were in the late 1980s and early 1990s when low
oil prices were combined with cuts in duty (for unleaded). Petrol was below 80 pence per litre
(2012 prices) for much of the time from late 1989 to early 1991 apart from a brief spike when
Iraq invaded Kuwait. There were broadly similar prices immediately before both the oil
shocks of the 1970s and official prices for rationed petrol after the end of second world war
were lower still in real terms. The lowest prices for the whole period were just before duty
was reintroduced in April 1928. Petrol was just over a shilling a gallon (around 55 pence per
litre in 2012 prices).
Duty and VAT trends
The real level of duty and VAT is given in the second chart. This starts in 1928 when duty
was reintroduced. There are eight major periods which can be distinguished:

Up to 1950 generally low real levels of duty, the only exceptions are the increases in 1931
which saw duty double in less than a year. The real duty level fell considerably during most of
the second world war and immediately afterwards

1950 to the late 1960s early rapid increases in duty were maintained in real terms through
much of this period. The short-lived sharp increase in duty during the Suez crisis is clear

Late 1960s to 1974 cash value of duty is held constant, real value falls by around 30%

1974 to 1989 VAT introduced, duty (on its own) less than at any time since the 1940s.
Combined value of duty and VAT increased rapidly jumps in 1974 and 1981.

1989 to 2000 the impact of the road fuel duty escalator and, to a lesser extent, higher VAT
and oil prices, means the total tax per litre increases by almost 90% in real terms

2000 to 2007 falling real value due to cuts or freeze in duty.

2007 to 2011 return of a duty escalator for the first years and an increase in duty and VAT in
2011.

2011 to present duty frozen or cut and no further increases in VAT.

17

18
2000

Political unrest in the

Middle East

1990

Commodity boom followed by

start of financial crisis

1980

Start of 2nd Gulf War

1970

September 2000 fuel protests

1960

Iraqi invasion of
Kuwait/ first gulf war

1950

Second 'oil shock'

1940

Maximum prices set during

first 'oil shock'

1930

Petrol rationed
due to Suez crisis

0
1920

Petrol rationed during

and after WW2

Tax on petrol
removed

Changes in the real price of petrol and major events since 1920
pence per litre in 2012 prices

150
150

125
125

100
100

75
75

50
50

25
25

2010
0

Real levels of VAT and duty on petrol

pence per litre 2012 prices
90

90

VAT

80

80
Duty

70

70

60

60

50

50

40

40

30

30

20

20

10

10

0
1928

1933

1938

1943

1948

1953

1958

1963

1968

1973

19

1978

1983

1988

1993

1998

2003

2008

0
2013

Petrol prices since 1920

New pence per litre, earliest price in each year

Retail price

Duty

Retail price

cash

2011
prices

VAT
rate

159.6
140.7
94.6
86.0
97.1

0.5
0.0
0.0
0.0
0.0

18.6
0.0
0.0
0.0
0.0

0.0%
0.0%
0.0%
0.0%
0.0%

..
1.8
1.4
1.1
1.7

..
82.8
67.4
54.5
83.6

0.0
0.0
0.0
0.0
0.4

0.0
0.0
0.0
0.0
17.6

1930
1931
1932
1933
1934

1.5
1.3
1.8
1.6
1.6

74.6
68.5
94.6
84.3
84.3

0.4
0.4
0.7
0.7
0.7

1935
1936
1937
1938
1939

1.6
1.7
1.7
1.7
1.7

88.6
92.9
89.8
86.1
86.0

1940
1941
1942
1943
1944

2.2
..
2.3
..
..

1945
1946
1947
1948
1949

Duty

cash

2011
prices

cash

2011
prices

VAT
rate

1967
1968
1969
1970
1971

5.9
6.4
7.1
7.2
7.5

86.1
91.1
94.5
89.5
90.5

3.9
4.3
4.9
4.9
4.9

57.7
61.2
65.4
61.2
59.9

0.0%
0.0%
0.0%
0.0%
0.0%

0.0%
0.0%
0.0%
0.0%
0.0%

1972
1973
1974
1975
1976

7.7
7.7
9.2
16.0
16.8

86.2
80.0
85.7
123.4
105.6

4.9
4.9
4.9
4.9
4.9

55.4
51.4
45.9
38.3
31.0

0.0%
0.0%
0.0%
25.0%
12.5%

18.1
18.9
38.8
39.7
39.7

0.0%
0.0%
0.0%
0.0%
0.0%

1977
1978
1979
1980
1981

17.5
16.8
17.5
26.4
29.1

94.1
82.1
78.4
99.8
97.2

6.6
6.6
6.6
8.1
10.0

35.5
32.3
29.5
30.6
33.5

12.5%
12.5%
12.5%
15.0%
15.0%

0.7
0.7
0.7
0.7
0.8

39.4
39.1
37.8
37.2
40.7

0.0%
0.0%
0.0%
0.0%
0.0%

1982
1983
1984
1985
1986

35.0
36.7
40.4
41.5
41.6

104.6
104.5
109.3
107.1
101.7

13.8
15.5
16.3
17.2
17.9

41.3
44.2
44.1
44.2
43.8

15.0%
15.0%
15.0%
15.0%
15.0%

91.1
..
83.3
..
..

0.8
..
0.8
..
..

34.9
..
29.4
..
..

0.0%
0.0%
0.0%
0.0%
0.0%

1987
1988
1989
1990
1991

38.5
36.7
37.2
38.4
42.1

90.5
83.6
79.5
71.8
72.4

19.4
19.4
20.4
17.7
19.5

45.6
44.1
43.7
34.9
35.2

15.0%
15.0%
15.0%
15.0%
15.0%

2.2
..
2.3
2.3
2.2

70.3
..
69.1
65.7
63.6

0.8
..
0.8
0.8
0.8

26.9
..
24.4
23.7
23.4

0.0%
0.0%
0.0%
0.0%
0.0%

1992
1993
1994
1995
1996

43.4
47.1
50.8
53.4
55.9

71.6
76.4
80.4
81.8
83.2

22.4
23.4
28.3
31.3
34.3

38.9
39.9
47.1
50.5
53.7

17.5%
17.5%
17.5%
17.5%
17.5%

1950
1951
1952
1953
1954

3.3
3.4
4.7
4.9
4.9

90.8
91.9
109.8
111.6
109.2

1.6
1.6
2.7
2.7
2.7

45.4
44.1
64.9
62.3
61.2

0.0%
0.0%
0.0%
0.0%
0.0%

1997
1998
1999
2000
2001

61.1
63.1
62.9
75.4
76.9

88.5
88.5
86.0
101.2
100.4

36.9
40.3
44.0
47.2
47.8

56.1
59.4
63.3
66.6
65.7

17.5%
17.5%
17.5%
17.5%
17.5%

1955
1956
1957
1958
1959

4.9
5.1
6.7
5.1
..

106.3
101.4
132.7
97.6
..

2.7
2.7
3.8
2.7
..

59.0
54.8
75.8
52.3
..

0.0%
0.0%
0.0%
0.0%
0.0%

2002
2003
2004
2005
2006

69.9
75.0
76.2
79.0
88.8

90.2
93.9
93.0
93.5
102.7

45.8
45.8
47.1
47.1
47.1

62.2
60.4
60.5
58.6
57.3

17.5%
17.5%
17.5%
17.5%
17.5%

1960
1961
1962
1963
1964

5.1
5.4
5.4
5.2
5.3

95.1
95.9
91.9
87.6
85.5

2.7
3.0
3.0
3.0
3.0

50.9
54.1
51.8
50.7
49.0

0.0%
0.0%
0.0%
0.0%
0.0%

2007
2008
2009
2010
2011

86.9
103.7
86.3
111.5
127.5

96.4
110.5
91.9
114.4
124.5

48.4
50.4
52.4
56.2
59.0

56.4
56.4
58.6
60.6
60.5

17.5%
17.5%
15.0%
17.5%
20.0%

1965
1966

5.7
6.1

88.4
91.7

3.6
3.9

55.6
58.7

0.0%
0.0%

2012
2013

132.9
137.6

124.8
119.8

58.0
58.0

57.3
55.4

20.0%
20.0%

cash

2011
prices

1920
1921
1922
1923
1924

4.7
3.8
2.2
1.9
2.1

1925
1926
1927
1928
1929

No tes:

P rices are the earliest given in each year. Fro m 1973 these are January prices, earlier figures co uld be fo r any time during the year.
P etro l was ratio ned fro m September 1939 to M ay 1950 and fro m December 1956 to M ay 1957 (Suez)
M aximum prices were set by regulatio n between A pril and December 1974
Higher rate VA T applied to petro l fro m 1975 to 1979
P rices adjusted to 2010 levels using HC Library Research P aper 03/82 Inflatio n: The value o f the po und 1750-2002 and the all-items RP I 1962-; ONS series CHA W and CZB H

Grades:

No . 1, 1920 to 1938
"P o o l" petro l, 1939 to 1952
P remier, 1953 to 1966

4 star 1967 to 1989

P remier, 1953 to 1966
P remium unleaded 1990 o nwards

So urces: UK petro l prices (1902-2002) and diesel prices (1889-2002), Energy Institute
Energy trends, Department o f Energy, vario us editio ns
Quarterly energy prices, DECC Table 4.1.1

20

Appendix II -Prices across the EU from the mid-1990s

The Social Indicators article Road fuel prices and taxes across the EU looks at how prices
and taxes have varied over the past decade or so. This appendix looks at earlier data on
prices back to 1994. The earlier data is important because it covers the period immediately
after the fuel duty was introduced. The UKs average prices of petrol and diesel became the
most expensive in the EU during the late 1990s. Three charts are included over the following
pages; petrol prices in each EU state, diesel prices in each EU state and the exchange rate.
The exchange rate is important, as the article explains, because of the size and the timing of
the shifts over this period. For instance, in the mid to late 1990s when the fuel duty escalator
increased real duty rates, the value of Sterling weakened and the two effects both made the
relative price of UK road fuels even more expensive. From 2007 to 2009 the value of Sterling
weakened sharply against the Euro and this more than outweighed real duty increases in the
UK. The net result was that the UKs relative prices fell when expressed in Euros.
The most obvious shift in UK prices compared to the rest of the EU came between summer
1996 and autumn 2000. The UKs petrol prices went from the cheapest in the EU15 to the
most expensive by a margin of 15-20%. UK diesel prices were the fourth most expensive in
the EU15 at the start of this period, soon became the most expensive and were so by a
margin of 40-45% at the end of this period.
Road fuel prices and taxes across the EU looks at later shifts in prices in more detail.
All the underlying data can be found at:
http://ec.europa.eu/energy/observatory/oil/bulletin_en.htm

21

Diesel prices in EU member states

1.80

/ECU per litre

1.60

UK
Other member states

1.40
1.20

1.00
0.80
0.60
0.40
0.20
0.00
1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

Petrol prices in EU member states

/ECU per litre

1.80

UK
Other member states

1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00

1994

1996

1998

2000

2002

2004

22

2006

2008

2010

2012

2.00

Exchange rate /

1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
1994

1996

1998

2000

2002

2004

23

2006

2008

2010

2012