Right Fuel Card’s opinion on rising fuel costs

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Fuel Pumps

Fuel prices are rising again. At Right Fuel Card we understand how frustrating the rises are for our customers and how this is having a significant impact on businesses.

We support calls by the Road Haulage Association Ltd (RHA) and RAC for further reductions in tax to support businesses.


Potential solutions to rising fuel prices

  • Essential User Rebate: A policy put forward by the Road Haulage Association would reduce the cost of fuel for hauliers, coach operators and other essential users of the road by 15ppl.  This approach has been taken by a number of European governments and is shown to have beneficial impact on the price of consumer goods and services
  • VAT rate reduction:   Following Brexit, the UK Government took full control of VAT rates with no further requirement to follow EU directives.  As such, one potential option is for the UK Government to reduce the VAT rate on petrol and diesel from its current 20%.  A temporary drop to 5% for example, could result in a price reduction of around 20ppl which would benefit personal and business users alike.

    It is also worth noting that VAT is linked to the total cost of fuel. RAC figures (see table) show that due to the rising cost at the pump in 2022 the UK Government is now receiving c2p more in VAT so the cost of the 5p fuel duty drop to the Government is only around 3ppl.

Why are fuel costs rising?

Since the start of 2022, Wholesale costs for Diesel have increased by 123%.  The upward trend has been in place since 2020 when prices slumped due to pandemic lockdowns slashing demand.  As demand rose back to its normal levels, so did the price. 

In February 2022, Russia invaded Ukraine sending shockwaves through the market.  As the third largest Oil producing nation, there was obvious concern as to what would happen to supply as well as a growing desire from many countries to discontinue using oil of Russian origin.  The situation created extreme volatility within the oil markets, the effect of which is being felt globally across all industries.

From June 1st, the cost of fuel in the UK rose further as all Russian origin oil imports were stopped. The jump in price reflected the much higher demand of non-Russian origin oil following the Ukraine invasion.

The USD to GBP exchange rate also has a large impact.  In 2008 the price of oil peaked at $140 per barrel  and at £1:$1.97 resulted in a GBP price of £71.07 per barrel.  On June 1st 2022 the barrel price was $118 at an exchange rate of £1:$1.24 resulting in a price of £91.13.

In the UK, the pump price of fuel continues to break records daily.  The increase has lead to essential workers calling in sick due to the cost of filling up their cars and firms having to close as they are unable to cover the increase.

Source: Wholesale v retail fuel prices (racfoundation.org)


The UK Governments response to rising fuel costs

In March 2022, the UK Government announced an immediate 5p reduction in fuel duty.  Whilst this was initially welcomed, it soon became apparent that the cut had little effect for consumers.  The Government accused Oil companies and forecourts of not passing on this saving.  However, data from the RAC suggests that the proportion of the price allocated to Delivery, distribution and retail margin has fallen considerably over the year and that the ongoing rise in the wholesale costs very quickly countered any saving at the pump from the cut in fuel duty.

With pump prices exceeding £2 per litre in some locations, the Government has ordered the Competition and Markets Authority to conduct a swift high-level review of competition in the fuel retail market to understand if the 5p cut was correctly applied and, if forecourts are being competitive or keeping pump prices artificially high to protect their own margins.

We do not believe that this review will help businesses and see it as a distraction in order to avoid implementing further tax breaks which will truly help businesses deal with the inflated costs.


Can having a fuel card help reduce my fuel costs?

Some of our fuel cards enable business users to fix their costs for the week, providing certainty in how they will pay. They would also benefit from credit facilities which can help  them to better manage their cash flow.  In most cases, customers will be able to purchase fuel cheaper than shown on the pump, but this is not guaranteed [GJ1] and is dependent on the card chosen and correct card usage. As an independent reseller, Right Fuel Card will always recommend a card based on an individual business user’s needs. Our quick comparison tool will help find the most appropriate card, alternatively, you can speak with one of our experts who can help you decide on which card is best for you before applying.


Other changes businesses can make to save money on fuel

Businesses can also save money on fuel by making changes to their vehicles and adapting the behaviour of their drivers so that they can be more fuel-efficient.  Some of the changes businesses can make include:

  • Removing extra weight from vehicles: This is a simple way to reduce fuel consumption which will then help to save your business money.
  • Optimising engine performance: By ensuring that vehicles in your fleet are in prime condition, you can help to improve their fuel economy. It’s therefore important that your vehicles are regularly being serviced and this can easily be arranged through Fixter.
  • Investing in better tyres and ensuring they’re not underinflated: Having good quality tyres has the potential to save businesses money on fuel and improve fuel economy by up to 6%. It’s also essential that tyres are not underinflated as this can increase a vehicle’s fuel consumption by 10% which unnecessarily adds to fuel costs.
  • Adapting driver behaviour: How drivers act on the road can significantly increase costs for your business. It’s been reported that those who drive responsibly could consume 60% less fuel. This can be achieved by driving in a higher gear, driving steady and slowly and stopping the practice of idling.
  • Installing a telematics system: Data from a telematics system can be used to improve the fuel-efficiency of fleets and reduce fuel costs. You can also take advantage of our online account management system and run detailed reports of your vehicles which will help you understand your fuel expenditure and allow you to identify ways to cut costs.  
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