Chancellor Rishi Sunak’s five pence cut to fuel duty will not stop the upward spike in prices as global markets panic amid commodity and supply chain disruptions. The price of a litre of Diesel has jumped to 180.29p this weekend. The data comes from a new report by the RAC.
The RAC, which provides roadside assistance and general insurance, issued a warning that the cost of refilling the tank is likely to rise further.
This price rise could mean that filling up a car with 55 litres would cost £99 at the pump.
And the average tank size of a car is approximately 55 litres.
Petrol currently costs 166.65 per litre, a rise of three percent this month and close to its all-time high of 167.3p from late March.
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The rise in fuel prices will have a knock on effect to the cost of goods and services in general and are a significant driver of inflation, alongside the Bank of England’s monetary expansion policies during the coronavirus pandemic.
The official rate of inflation in the UK is set to rise to nine percent in April when the figures are published on Wednesday.
This is well above the Bank of England’s two percent target.
The rate of inflation is at a three-decade high, and it is putting pressure on the Bank of England to do more to tackle runaway price rises.
The bank can increase the interest rate but can do little to influence rising fuel costs which are largely determined by global markets.
Simon Williams, of the RAC, said diesel’s continued surge is in part due to the significance of Russia in the supply chain for the fuel.
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Speaking to the Daily Telegraph, he said: “Sadly, despite the Chancellor’s 5p a litre duty cut the average price of a litre of diesel has hit a new record high at 180.29p.
“Efforts to move away from importing Russian diesel have led to a tightening of supply and pushed up the price retailers pay for diesel.
“While the wholesale price has eased in the last few days this is likely to be temporary, especially if the EU agrees to ban imports of Russian oil.
“Unfortunately, drivers with diesel vehicles need to brace themselves for yet more pain at the pumps.
“Had Mr Sunak reduced VAT to 15 percent as we call on him to do instead of cutting duty by 5p, drivers of diesel vehicles would be around 2p a litre better off, or £1 for every full tank.
“As it is, drivers are still paying 27p VAT on petrol and 29p on diesel, which is just the same as before the Spring Statement.”
At the time of the tax cut, Rishi Sunak brandished his move, “the biggest cut to all fuel duty rates, ever”.