With the cost of fuel rising, the current situation in the Middle East, dwindling resources and peak oil almost upon us, its clear the long term trend in the cost of oil is going to be upwards.
Some people argue for a fuel stabiliser to fix the price of fuel. All this will do is insulate people from the fluctuations in prices. Others argue for discounts for those living in remoter rural communities. This would be hard to target and expensive to administer.
Some want the Chancellor to scrap the planned fuel duty increase in April but, that means using tax-payers’ money to fix a problem that we cannot control – the long-term upward trend in oil prices.
First introduced by the Conservatives in the 1990s, the fuel duty escalator helped reduce UK carbon emissions significantly until it was scrapped by Labour in 2000. The Policy Studies Institute has shown that if the Labour government had stuck with its escalator policy of a 6% above inflation rise every year, the subsequent reduction in demand over the last 10 years would have lead to a 5.4% reduction in total UK carbon emissions. Not only that, but an extra £100bn of tax would have been collected by 2010.
This mechanism was reintroduced by Labour in 2010, which raises the price of fuel by a small, regular and predictable amount – a proven and effective way to reduce fuel use and carbon emissions. It gives motorists and businesses a clear incentive to reduce their fuel consumption – changing their travel patterns, for example – but also allows time to make that adjustment.
That’s why it would be wrong to scrap the fuel duty escalator. The sooner we accept that higher fuel prices are here to stay, the sooner we can adapt our behaviour. Raising fuel duty by 8% a year would send a clear signal that we can’t carry on as we are.
There is no doubt that, as long as we depend on oil for fuel, we face a permanent energy crisis which makes us all vulnerable. When it comes to adapting our lifestyles to reflect the realities, what we need from government is action that is both socially just and environmentally sound.
