The British Chambers of Commerce has today released its fuel pricing model, which illustrates the staggering amount the Treasury has already made in oil revenue since last October's fuel duty hike of 2p per litre.

 

The BCC's model has been developed with the help of Grant Thornton and follows the submission of a letter to the Treasury, which included the signatures of 700 businesses campaigning against April's planned fuel duty rise. The new model estimates the windfall in additional corporation tax revenues accruing to the Government as a result of the increase in North Sea oil prices beyond the $58.1pb and $68pb used for Treasury forecasting at the time of the Budget Statement in March 2007, and the Prebudget Statement in October 2007 respectively. This figure, for oil alone, stands at £3.383 billion. The model further estimates the revenue resulting from October’s 2p increase in fuel duty and the additional VAT windfall resulting from the increase in fuel prices at the pump due to the higher price of oil.

Summary Expected - Six Months October - March 2008             
                       
2p Fuel Duty will raise £        481    millions       
Additional NSOG Tax Due to Oil Price     £1.352    billion
VAT Due to Oil Price Increase    £ 324   millions       
Total Government Windfall from Oil Price         £ 2.157    billionSummary, Year to End March 2008 - Including Windfall April to September 2007   
                                       
2p Fuel Duty will raise          £  481     millions       
Additional NSOG Tax Due to Oil Price     £ 2.352      billion
VAT Due to Oil Price Increase            £  549     millions       
Total Government Windfall from Oil Price         £ 3.383      billionCommenting on the figures published today, David Frost, Director General of the British Chambers of Commerce, said:"It is clear from this data that the Treasury has already generated billions of pounds in extra revenue from last October's 2p fuel duty increase. Given the economic difficulties now facing businesses in 2008, we urge the government to realise the damaging effect these rises will have on the competitiveness of British business, and to scrap the next 2p hike planned for April."

Tim Hutchings, Hertfordshire Chamber of Commerce & Industry Chief Executive, said, “It is about time that this government recognised the damage it was doing with such high levels of indirect taxation. It would not be quite so bad if the money raised was being used to best effect. It is little more than constitutional highway robbery, at least Dick Turpin wore a mask”.

The BCC model takes account of monthly fluctuations in:

  • Fuel (petrol and diesel) sales;
  • £:$ exchange rate;
  • Price of Brent Crude oil
  • North Sea oil production – gas is excluded from this analysis as the Treasury have not yet published a figure for gas prices available for use in their forecasting models.
Gas production total would add a further 1m boe (barrels of oil equivalent), the model assumption for oil production was 1.1mbpd (barrels per day)The data for the four inputs above have been used for Oct 07 through to Jan 08, with fair assumptions made for February and March to complete the analysis for the six months ahead of the next fiscal year.Data Sources:   Further Assumptions  
  • Fuel sales for February and March 2008 are the same as the February and March 2007 figures;
  • £:$ movement is downward in February and March 2008 with means of 1.95 and 1.93 respectively;
  • Brent crude falls to $89pb and $88pb in February and March 2008 respectively.
Grant Thornton modelling assumptions used in the BCC model
  •  
    • 25% premium on North Sea oil to account for additional revenues for Petroleum Revenue Taxation;
    • 15% increase in overheads due to the increase in oil prices.
For further information contact the Hertfordshire Chamber of Commerce on 01707 398400