Minister to call for fuel price cut

Written By Unknown on Kamis, 06 November 2014 | 15.36

6 November 2014 Last updated at 00:01

The chief secretary to the Treasury is to urge petrol and diesel distributors to cut prices further after recent declines in the cost of oil.

Oil has fallen from about $115 (£72) per barrel in June to about $84 per barrel, a decline of about a quarter.

In comparison, petrol prices in the UK have fallen from a high of about 131.7 pence per litre in the summer to 124.22 pence - a decline of about 6%.

Danny Alexander is to demand assurances price cuts will be passed on.

Mr Alexander will use a speech in Aberdeen to warn people would "rightly be angry" if they felt prices were not coming down as much as they should.

For diesel the drop is from 136.37 pence per litre to 128.58 pence.

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"I believe it's called the rocket and feather effect," he will say, in prepared remarks seen by the BBC for a speech to the Highlands & Islands Branch of The Energy Institute in Aberdeen.

"The public have a suspicion that when the price of oil rises, pump prices go up like a rocket. But when the price of oil falls, pump prices drift down like a feather."

While no research supports this, the thought of this effect creates ill feeling, he will say.

During the period, the pound has weakened against the dollar. Whereas a pound bought $1.7165 at its height in the summer, it now buys $1.598 - a drop of 6.9%

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Because oil is traded in dollars, the weaker pound has reduced the effect of the drop in oil for UK consumers.

Out of the 124.22 pence average paid for a litre of petrol, about 65% of the price is accounted for by tax, according to analysis by the AA.

As well as being charged Value Added Tax (VAT) at 20%, 57.95 pence per litre is charged in fuel duty.

In September, three major UK supermarkets said they would cut the prices of petrol and diesel.

Sainsbury's and Tesco both announced a drop of up to five pence per litre, while Asda said it would reduce petrol by up to one penny and diesel by two.

The motoring organisations AA and the RAC welcomed the move.

However the group representing independent fuel retailers said the announcements would further endanger local petrol stations.

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