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Motorists deserve a full inquiry into fuel price-fixing allegations

14 July 2013

Everybody knows that the price of motoring fuel is too expensive. Often, this is blamed on the taxman: at nearly 60 per cent of the cost of fuel, it is a toxic tax that affects the price of everything. Of course, we should recognise that fuel duty is 13p cheaper in tax terms thanks to actions by the Chancellor, but fuel duty needs to be a top priority for tax cuts as soon as financial conditions allow.

But the desire to see lower fuel taxation often means that the wider debate on the price of fuel is overshadowed. This changed in May this year when it was announced that the European Union had raided the offices of several oil giants to look into allegations of price fixing.

Many have long suspected that there may be some manipulation of oil prices. Even with the fuel duty freeze, the price of fuel continued to rocket upwards. Of course the global price of oil continues to play a significant role, but it is often forgotten that when the global oil price goes up, the price of fuel rockets up. Surprise, surprise, however, that when global oil prices go down, oil companies are slow to pass these savings on to the consumer.

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And this is just a drop of oil in a very murky ocean. I have even been contacted by whistleblowers with disturbing stories of oil price manipulation.

That is why I joined up with Fairfuel UK to press the OFT to investigate allegations of oil price manipulation last year. Along with other MPs, I called for an inquiry in the House of Commons and received cross-party support.

The OFT held a short inquiry on whether to have a full inquiry, and decided there was no charge to answer, saying that the markets were working normally. Needless to say, the public were not convinced. And it has been left to the EU, and the United States, to investigate allegations of price-fixing.

So what can we do about it? On Monday morning at 9am, I am joining up with Fairfuel UK, alongside other MPs and consumer groups, to present the Fairfuel UK petition that has the signatures of over 30,000 British motorists. The petition demands a proper UK-led inquiry lasting 18 months into the great oil company rip-off. It is time that the OFT acted on the unanimous will of Parliament, and mounting public anger, to carry out the full inquiry that motorists and others deserve.

The price of fuel is not just one of economics, but also one of social justice. The cost of fuel hits the poorest twice as hard as the richest. The average Briton spends 10 per cent of their disposable income on fuel each month, but it has been estimated that the poorest 800,000 spend 27 per cent of their disposable income on fuel. But cars are essential to our society – 71 per cent of us still drive to work – and evidence shows that those who cannot travel to work stay unemployed longer.

Robert Halfon is Conservative MP for Harlow.

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  • Ian

    I noticed just the other day how diesel shot up from £1.41p per litre – to £1.43p!!!.
    Just in time for me to hear on the news today – that because of the “middle East” Stability at the moment (what??!!) – that the price will be dropping over the next week or two!!. Soooo they petrol retailers get wind of a decrease – put the price up – so they can reduce it back “to what it was” – so they don’t lose out!!!
    Very Clever indeed – do they think we are all fools??!!!
    No – but they know we rely on it……….so do what they like!!. Where is the “Regulation” in this country???
    The Government wont do anything – because the higher the price – the more tax they rake in!!! (2nd highest in Europe!!)…….They are all “at it”!!!

  • Tom Heywood

    BP are the worst the two round here in which a sainsburys is in between are now 4-6p per litre more expensive as prices have shot up by 4p in last week. Surely that’s unjustified as other garages have increased by a penny or 2?

  • Mynydd

    With respect to your claim “Of course, we should recognise that fuel duty is 13p cheaper in tax terms thanks to actions by the Chancellor” This is straight out of the governments spin book. Fuel duty can only be 13p cheaper if the Chancellor had actually reduced the duty by 13p, which he has not done. Logically you can only compare like with like, this will show the fuel duty charged by this government is the same as that of the previous government when it left office. As I said it’s not actually 13p cheaper. Also another element in the price of fuel is VAT, this government has increased it from 17.5% to 20%. Taking these two points into consideration, the present government take on the sale of fuel is higher than that of the previous one, thereby making fuel at the pump more expensive, not less. Mr Osborne has been pulling the wool over peoples eyes, but I didn’t expect the media also to fall for it as well.

    • Count Dooku

      Halfon is not the media. He is a Tory MP who is very clued up on the duty issue.
      That 13p statement is purposefully there to deceive.

      • Mynydd

        Thanks I overlooked that Robert Halfon is the conservative MP for Harlow.

      • AnotherDaveB

        Much like the ‘have cut the deficit…’ line. They’ve increased taxation, not cut spending.

        • Count Dooku

          To be fair they have actually cut the deficit. That’s factually accurate, whether by increased taxation or increased revenues due to higher activity in the economy.
          What’s amazing though is that only 10% of people on the country know that spending is rising. It’s amazing how stupid the population are yet they are allowed to vote. You get the govt you deserve I suppose.

          • AnotherDaveB

            Ignorant and stupid are two different things.

            The BBC get a £4 billion annual subsidy to educate and inform the public. I think ignorance on this scale is due to deliberate misinformation.

    • itdoesntaddup

      Remember that the tax take on higher oil prices is typically 62% and runs as high as 81% on some fields in the North Sea.

    • itdoesntaddup

      Road fuel duty was 57.19ppl wef 5 April,2010, 58.19ppl wef 1 October 2010, 58.95ppl wef 1 January 2011, and finally reduced to 57.95ppl wef 23 March 2011 – still above the inherited level at the election by 0.76ppl. VAT went from 17.5% to 20% on 4 January 2011 – and the increase is worth 1/48th of the pump price exactly. In total it’s a little over 3.5ppl higher due to taxes.

  • itdoesntaddup

    Why do you want an 18 month enquiry? Surely a rapid answer is far better than making it like an elephantine pregnancy before producing results. Ah, yes. 18 months of being able to tout the same propaganda without foundation to back it.

  • itdoesntaddup

    Let’s ignore the 25%+ increase in wholesale price caused by policy to deflate the pound.

    Let’s remember that LIBOR manipulation resulted in lower interest rates, not higher ones. Likewise QE manipulation of bond markets, conducted on a massive scale in both the US and the UK on behalf of governments. Let’s note that the flood of new money created was routed by banks on behalf of the wealthy into commodity markets to seek preservation of the real value of wealth in the face of money printing. This money probably now accounts for around three quarters of open interest on the long side in oil markets – but a proper inquiry might reveal it is higher, if it addressed the issue at all. Then we have the premium for political uncertainty caused by meddling in the Maghreb and smoothing the path of Islamic extremists to power. Together with the exchange rate and other financial interventions, it might account for 50% of the current oil price in sterling terms.

    Against this we have allegations that the Platts price reporting system has proven inadequate and open to manipulation due to a combination of their own journalistic arrogance (refusing to accept evidence from certain counterparties) and incompetence, accompanied by bandwagon leaping from Halfon who pre-judges that “oil companies” are guilty of the alleged manipulation while ignoring the many other market participants in oil trading, which these days is dominated by banks (and has been for perhaps twenty years).

    Yet Total, who are alleged to be the source of complaint that prompted the EU investigation are a) an oil major themselves, and b) have explicitly publicly stated that they do not believe that the oil companies initially raided by the EU are responsible for any manipulation/misreporting they think they may have observed.

    At least this time Halfon is not trying to claim that consumers have lost large sums in consequence as his previous forays onto his hobby horse have tried to claim. The reality is that any manipulation that did occur is likely to be no more than a transfer of profit from one set of traders to another as they play spoof with each other for their bonuses, with little or no impact either way on the average prices obtained by producers or paid by consumers.

    Perhaps we need a proper inquiry as to the influence of government on oil prices in ways other than taxation. Now that would be interesting.

  • Alex

    Oh, and will you please publish the costs of this investigation; both to the taxpayer and to the motorist through the costs placed on the industry by the investigation.

  • Alex

    “great oil company rip-off”. Are you aware of the concept that people are innocent until proved guilty?

    There seems to be an increasing tendency for politicians to make allegations of price-fixing against industries such as the energy industry, supermarkets etc. More often than not these are quietly dropped when no evidence is found. Of course there are true examples of corruption in business (LIBOR, for example) but there is a problem that MPs have a clear incentive to make the private sector the scapegoat for the inflationary results of government policy, and little cost when those allegations are shown to be untrue. In fact they leave an impression of wrongdoing when it is undeserved.

    Will those of you calling for an investigation make a clear public apology if these allegations are not proved?

  • Tom Tom

    Raid Goldman, Barcap, JPM, and those brass-plate offices in The West End then……it is EFT Oil that is manipulated there is no shortage of the physical, indeed Saudi Arabia is stepping up production to fund the Egyptian economy. There are tankers at sea full of the stuff looking for a berth. Now that STOR is being set up in the UK using diesel generators to produce electricity it is imperative that diesel prices fall before the great blackout becomes the only economic approach to energy usage.

  • Count Dooku

    As you already know, ~60% of the cost of a litre of petrol is tax. The rest is made up of a number of things, namely transport & distribution, retail, refining, storage and of course, the cost of oil.
    Now if you’d done your research, you’d know that retailers buy petroleum on the futures market i.e. the petrol in the forecourts now was probably bought as a July 13 contract back in 2012, and as such has very little to do with the current spot price of oil.
    In fact, if we assume £1.40 a litre for petrol, the oil price would have to collapse 22% to bring the petrol price back to £1.30, ceteris paribus.
    You are definitely barking up the wrong tree. Profit margins for oil companies and the distribution chain is minuscule. The only reason why they are in business at all is the huge revenue streams and economies of scale. If you want fuel to be cheaper, continue to lobby the govt to CUT fuel tax.

    See this for the breakdown:

    • ButcombeMan

      My observation is that Tesco seem to involve themselves in post code pricing, that Asda do not.

      In consequence I make a real effort not to use Tesco. Ever, for anything.

      Otherwise, I think, considering where it is obtained from -road fuel remains astonishingly cheap and I observe most drivers in the Uk do not drive in a style which will conserve it.

      • Count Dooku

        I is actually unbelievable how cheap it is considering the tax and the hassle to extract it and refine it. A bottle of Evian costs about the same for Christ’s sake!
        Human ingenuity at its best.

  • telemachus

    “The cost of fuel hits the poorest twice as hard as the richest”
    Robert are you one Tory who cares?
    Will your post jolt your colleagues into caring?
    I doubt it

    • AnotherDaveB

      If MPs, of any of the Westminster parties, did think the price of fuel was unjust, they could reduce it overnight by cutting the tax part of the price. Not happened yet.

      • Mynydd

        Yes let us have the 13p cut in fuel duty the government boasts about and then there’s VAT why not bring it down to 15% as per the last government.

        • AnotherDaveB

          The VAT is at least reclaimable for business users.

          I think they should enable businesses to also reclaim fuel duty, perhaps through the existing VAT system.

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