It's a no-brainer. The gov is doing this to send a clear signal: they aren't going to lessen the taxes just because the oil is high, so don't expect a free ride. It sends a message to the people to drive less, to increase mileage, to conserve.

So... it's not that it is bad. It seems though too thin an increase. It is as if the government is poking with the public to see if people will riot or not. For me, as long as the country doesn't enter poverty, anything to increase the petrol's price is welcomed.

A feature of a high fixed taxation, the excise duty, is this damping effect of product price variations on the sticker price.

When I on occasion feel obliged to defend the similarly high norwegian fuel duty, I use this argument. It's not easy to understand for everyone, or maybe they just don't want to understand any arguments in favor of the tax.

I recently found an old receipt from a purchase of motor fuel carried out around the turn of the century. The price for that particular fillup was 9.09 NOK/ltr. Nowadays the price varies between 10.50 and 12.50 NOK/ltr. If it wasn't for the fact that it's mentioned in the news every time the oil price set's a new record I doubt the norwegian motorist would be any more aware of it than he is of the fact that norwegian oil production has been in decline for 6 years or so. (Seriously, I have yet to talk to a single person that knows this)

I usually compare the price of fuel to the price of a bus ticket. In my oppinion the price of fuel alone should be atleast twice the price of a bus ticket. A bus ticket is on average around 1 NOK/km I guesstimate. The average car I assume to use around 0.07 liters/km. 1*2/0.07=28.57 NOK/ltr. In other words, the price of petrol is still less than half of the target price.

GBP/NOK 11,08
USD/NOK 5,43
EUR/NOK 7,69

Yes, of course the tax should be raised further. We should increase the tax on petrol more than diesel so that petrol is the more expensive as it is in nearly every other country to aid a switch to more efficient diesel vehicles and increase the amount of vehicle fuel we can get out of a barrel of oil.

You cannot buy a right hand drive diesel Smart Car with its 88 miles per UK gallon fuel consumption for use in the UK. I suspect part of the reason is the lighter tax on petrol removes part of the incentive to own one.

Not that I would not advocate the same policy in the US, I really would, but have any of you looked at the message boards on GassBuddy.com?

I'd be scared of these people if the taxes went up.

I think this is the wrong approach since it doesn't explain
1) why it has to worsen the natural wholesale price rise
2) why fuel saved in the UK won't be used in China and India
3) whether governments will squander the revenue.
A better approach would some form of disguised rationing or a measure which eases price rises if motorists back off. For example nonstationary emissions could be included in the European Trading Scheme along with some other serious bug fixes. Using the recent price as a baseline there will be an extra carbon component. If the cap stays the same and people take the bus then the fuel price rise could stabilise. If they keep driving V8 Range Rovers the fuel price goes up even more.

Other schemes are discussed in
http://www.cfit.gov.uk/docs/2007/climatechange/pdf/2007climatechange-ets...

Demons are good things to attack. Shoot them with silver bullets, drive stakes into their hearts, and if they are inanimate objects that people need, then tax them so that the people using them will clap their hands in joy, not realizing that it is they, not the object that is being taxed (plundered).

I say that if the Brits are too out of touch to realize that their government is using a human calamity as an excuse to take more of what working people produce, then they deserve the butt f**king that they are getting. Sell them some KY Jelly to ease their pain, and to make a little profit to boot.

The time for timing is here.

Just in time the walmart jockey says
Just in time on the dime spin the wheels
Just in time the peak is here
Spun the wheels on the new
Car yet?
The guy down the street for
1,635 USDollar gives his old car the boot
The impaled impala is FleXFuel
E-85
No where in town
No stations are missing out
On his money
He has to buy gas
No where in town the E-85 bird flies

The Lord of flies
Filed this report
The retort
I'll tell you
Is fast the down slope
Faster still

I sit on a window sill
Now the thrills are gone
I am retired you see
A tup-Pence is not my wage
I asked for Higher salary
I wanted a Penny a day
In God We trust Our money says
What does the Brits say
I don't know
But I'll ask you?
eeeeewwwee,, I smile BS here
Again someone is playing games

With my money
Your money two
Markets
The bottom Line
You in the bread line too
I will be today in a few
I serve the Homeless
My retirement plan you see
Help the helpless
The hopeless
The crazier than the me Id's
Ego's
Libidos
I promist,, the promise
Mist the dew
hand me a Mountian dew Dude
I on down hill slope duty today
Sky patrol

Where do you work
Who so ever do you trust
I know who's name is on
My penny

My 2 cent's worth,
1982 old coppers of course
Everything else is not worth
anything it is all HOT AIR

Charles Edward Owens Junior
Check me out, My mail's in the profile
WEb blog too
I am Not dead yet
I have not gone to bed yet
Pushing 40 hours up now

bye bye buy buy by by lines

Chris, I agree that higher tax on oil consumption is required and that lower tax / greater incentives for UK oil production are also required. When prudent Mr Brown chickened out of petrol tax increases in 2000, he added the tax on the off shore producers instead, thereby encouraging the consume more, produce less paradigm for the UK economy.

As you point out though, high fuel taxes have a massive de-gearing impact on the rising cost of the underlying product and price based conservation is therefore muffled throughout Europe. In reality, we actually need a much more progressive tax on fuel if folks are to be forced to consume less. This, however, would be inflatioary and discriminatory.

So personally I'd prefer to see legislation on car engine size, power, efficiency and speed limits as a first measure for reducing consumption - does anyone know what the savings here might be?

Off topic - we are in the UK facing an allied problem with fixed interest rate mortgages where recent interest rate rises have not been felt by millions who remortgaged at around 4% fixed in 2003/4. The interest rates for millions will rise to over 6.5% between now and Christmas. Those who are paying interest only will face an over 50% rise in their mortgage payments.

I've been talking to several different bank managers recently to be told that the banks are now carrying a significantly higher level of open bridging - those who have bought a new house and have yet to sell their old. Furthermore, since the banks are being squeezed now, arrangement fees for new mortgages are set to escalate - from a few hundred to well over a thousand pounds.

Sorry for the digression - below is a chart showing the impact of rising oil imports on UK trade balance:

UK Energy Security on TOD E, July 2007.

Just for completeness ...

a US gallon of petrol is now 3.79 x 0.9755 x 2.04 = $7.54

a US gallon of Diesel is now 3.79 x 0.9880 x 2.04 = $7.63

These are average prices - some people are paying much more!

UK North Sea production is declining at >8% year - so we don't just see 1% or 2% increase in oil imports like other countries steadily growing - it's closer to 10% of consumption just for the economy to stand still.

With world net exports declining, the UK is in a serious situation - but with an election due don't expect any more than a couple of pence of extra tax!

Xeroid.

So assuming the product/barrel price where correlated then $200 oil would result in a per litre price of about:

(200/80 * 32p) + 50.35p + 17.5% = £1.53 ($11.88 / gallon)

I think I can live with a 50% increase...

However, over in the US...

(if we assume $80 oil = $3 gas then $200 oil = $7.50

-or about the same as what we in the UK pay and have taken 20 odd years to get used to...)

Overall I think that government could do themselves a big favour by making it more transparent that the taxation goes on transport infrastructure and renewables perhaps.

Nick.

New 'future scenario' document posted at : http://www.megatrends2020.com/html/chapter1.html -follow the first link titled "Peak Oil Joining The Dots"

Yes: the UK government should significantly raise fuel taxes. We could make it net-out to consumers by reducing road tax to a commesurate amount, but we need to make the marginal cost of driving an extra mile higher.

Or, to put it another way, if we raise the price of using fossil fuels now, we mitigate the later effects of reduced oil availability. We encourage consumers to choose not to have a car, or to use it only sparingly. We make train or other public transport relatively cheaper. In other words, we use price elasticity of demand to reduce our dependence on oil before Hubbert's Peak forces us to do it.

Fuel duties are an enigma to me. Somehow these taxes managed to survive in Europe during a time of heavy liberal sentiment against any kind of State intervention on the markets. Recent strong attacks by the ultra-liberal sects of Society haven’t yet damaged the tax and up to now governments have managed to slowly increase them.

It might have to do with the fact that like the VAT the fuel duty is a tax that does not directly promote social equity, like a wage tax does. But still is an exception that makes the rule.

Fuel duties had their major role during the years of Cheap Oil, taming consumption per capita and promoting efficient urban planning and transport systems. As the Age of Cheap Oil comes to an end their use becomes more limited, although they remain as a useful tool to rapidly promote short term conservation. Legislation on engine size, vehicle weight, etc, takes several years to produce the desired effects.

As the economic difficulties brought by the Hubbert Peak deepen the pressures on fuel duty will become progressively stronger. Being the liberal sentiment common to the vast majority of voters in Europe, it won’t take long before someone gets elected on the basis of a cut on fuel duties.

This advanced price signal has two advantages, ... delivers revenue to our government in the form of tax receipts

The people who say a tax is just a tax, have a good point. But I'm not so worried about whinging taxpayers, I am more interested in the dilemma for the government. They need to replace tax revenue from North Sea oil with something else. Ok, taxing petrol and CO2 emissions instead is a good idea, they get revenue and also discourage undesirable practice.

But what happens when we stop using petrol and become carbon neutral? The government will need to find something to tax to replace the money it got from fossil fuels, or reduce government spending. Is there any evidence that the government gets this?

In the long run, taxing undesirable practice also has the effect of making tax revenue dependent on the undesirable practice - the addiction is transferred, not eliminated. In addition, the taxation raised is used to finance millstones around the neck, e.g. health services and benefits. Having created these monsters using oil revenues, they are hard to cut back.

That is why I think the overall effect of taxes is rather neutral, and the ability of governments to influence behaviour via taxation is a lot more limited than people think. What the government needs to be doing is reducing spending, especially infrastructure maintenance costs.

Students of Tainter will note the danger of perpetuating practices of a previous paradigm, instead of adjusting to a new one.

Chris,

It seems that more governments are PO aware, or at least behave that way.

I would assume that especially in the UK, it is very clear to the government that they have peaked. They can see it in their production numbers.

Wrt your question if the government should raise tax more or not: That depends on how well alternatives are available. If no public transport, car pooling, telecommuting or bicycling/walking options are really available, then it is no more than a tax increase which cannot be avoided by the public. This also depends on how the infrastructure of your country is. It seems to me that this is the case in the US, with the big shopping malls and the streets without bicycle paths and no trains, but not really in the UK.

In the Netherlands, the government has also increased tax on diesel & petrol, but did also a few other things to reduce oil consumption.

For this American, your question poses a great mystery.

Europeans seem to routinely accept harsh, swingeing, punitive taxes in the manner of sheep being led ever so calmly and quietly to slaughter. Even the British petrol-tax revolt of 2000 was merely a bootless ritualistic exercise. To be sure, it engendered major inconvenience, but in the end the sheep calmly and quietly slunk home, having produced no lasting result whatsoever.

On the other hand, more than one returned American expat has told me, in effect, "The government over there took all my money and gave me back only a child's allowance. I don't understand why people over there put up with that, but they do. It was interesting to visit but I'm sure glad I don't live there."

On still another hand, your "hauliers" have been complaining mightily. But then again, they are exactly like farmers in this respect. They complain perpetually, with their words clearly stating they would be better off to find some other job. But just as perpetually, they keep on doing exactly what they keep on complaining about. In America, I'd be asking them - especially the younger ones - why they don't simply take up another occupation.

In the end, European culture seems so alien with respect to these matters that ordinary reasoning just doesn't seem to carry over. So is the tuppence increase for better or worse? I really don't have a way to know.

In the short term raising tax on fuel is probably the way the government will go.

However, this approach is likely to be overtaken by events, such that the only realistic option will be some form of rationing.

Whether this will be driven by a shortage of product, a balance of payments crisis or climate change is a moot point. However, the end result will be the same - there will be a per capita allocation of “low cost” fuel or a per capita carbon allowance, with extra fuel being able to be purchased at much higher cost on some form of market. Year by year the amount of the allocation will be reduced.

If the government have time to do so they will introduce the system under the climate change banner as a way to reduce CO2 emissions. Your future identity card will morph into a personal fuel/carbon allowance card.

Fuel tax revenue will fall to some degree and will be made up by charging for your fuel/carbon allocation. I think it quite likely that a road pricing scheme would also be introduced, so as to capture revenue from electric vehicles or high efficiency hybrids.

One thing we can be sure of is that tax revenues from personal vehicle usage will not decrease!

Welcome to politics.

There is every danger of a tax revolt on this issue.

Yet the statistics show the real price of petrol in the UK has actually fallen since the petrol strike of 2000. But consumers don't think in inflation-adjusted prices, they think in terms of what's in their pocket (or not).

The real price of driving in the UK has been falling for 10 years, a function of the steep drop in the price of new cars. In consequence, the number of cars has risen by 20% (7 million cars) since 1997. But the consumer is just noticing petrol prices rose.

Of course it's all ludicrously short-sighted. We're going to depend on politically volatile regions (read: civil wars and supply interruptions, and Mr. Putin controlling our gas supply) for our energy in the future, so anything we do to reduce that dependency is a good thing.

Since the government won't say that to the public, that this is about the National Interest, and the future of the Nation, the public doesn't rise to the occasion.

Although I think global warming is the more immediate threat, the government would do better to talk about National Security, and patriotism, rather than something the public can't really understand and grapple with.

But that might lead to difficult questions about whether the invasion of Iraq was really about oil....

In a shadenfreudic spirit of mischief, I threw a stone at the hornet's nest by posting the following comment on the petrolprices.com website:

"A responsible government that was properly in touch with the terrifying geological and ecological realities now bearing down on us all -- whether we like them or not, whether we choose to see them or not -- would begin immediate motor-fuel rationing, plus a serious increase in travel-fuel prices, not a mere piddling sixpence a litre phased over time. Genuinely useful transport work, strictly defined, could earn a rebate on price, and extra rations. The rest of us would have to grin and bear it. And -- most importantly -- start working out ways to cope with a big drop in fuel availability, and a huge rise in its cost. We're going to have to do that anyway, however much we scream and fight against it. There are some geo/ecological realities over which humankind have no power whatever. But a wise government would at least start crash-priority preparations for the inevitable early, to alleviate the worst consequences. But then, for wise government, we'd need to live in a genuine democracy. Wonder if I'll live to see that in Britain? Probably not."

It was comment number eight thousand and something, so I don't suppose many people will read it. I also joined the nine percent of respondents on that website who voted to keep the increase. Seems that most of my fellow-Brits have a few more shocks to endure befor we come to the great awakening here.

PS: I should have said also in my previous comment that I live on a state pension of £119.5 per week, plus a bit extra earned by making things. And still I can afford to drive a modest diesel VW, for the few occasions when my bike can't handle the job, and the bit of fuel that I buy still seems criminally cheap, even to someone on my income level. It's just too damned easy for us to squander it here in Britain, even now, as we sit "...in the hollow of the deep sea wave...." And as I pedal about my locality, I'm just horrified by the steady increase of the number of sucker-trucks (SUVs) that my sleepwalking fellow-citizens are awarding themselves. The awakening, when it comes, is likely to be pretty shocking, I suspect.