UK Fuel Prices Brexit & Bremain Predictions
7 June 2016 | Bruce Compton
In the run-up to the European Referendum on 23rd June, we will all be asking ourselves what factors will be making us vote either IN or OUT. Fuel prices may well not be something that you have considered.
This article covers what has been predicted by both the Brexit and Bremain campaigners regarding how a stay or go vote will affect UK fuel prices.
It seems that a large proportion of the motor industry has declared themselves to be in favour of a vote to remain within the EU with the SMMT (Society of Motor Manufacturers & Traders) divulging that three-quarters of its members had stated that they were looking for an ‘IN’ outcome.
There has been numerous claims and predictions threatening a soar in petrol prices should we pull out of the EU, with the AA predicting an increase of up to 19 pence per litre. These figures are based on a prediction that leaving the EU will inevitably cause a 20% weaker £ alongside OPEC (Organisation of the Petroleum Exporting Countries) already looking to freeze oil output increasing oil prices.
With this in mind, the AA have predicted a cost to the average 2 car UK family of an extra £494 per year, an 18.7% rise in the cost of fuel.
The Brexit campaign backed by former Mayor of London Boris Johnson would argue that most of the grim predictions made regarding fuel prices by the Bremain campaign are scaremongering.
All of those three quarters of the SMMT who have indicated that they would urge for an ‘IN’ vote are large companies…none of the smaller ones indicated the same. They say that prices could stay low.
The uncertainty regarding whether we will stay in or out f the EU has already had a dramatic effect on the value of the £. The £ having fallen to it’s lowest value against the $ since March 2009.
Fuel prices are generally related to the value of oil and oil is traded most often in dollars, therefore sterling value against the euro is less of an issue than it’s value against the dollar. The bulk of our fuel prices are taxes and fuel duty – making up 70% of the cost of a litre and this will not change following a Brexit.
Howard Cox ( Founder of Fair Fuel UK) who are foremost n campaigning for lower tax on fuel prices stated that the AA are engaging in ‘ill-informed exaggerations to scare drivers about Brexit’. He added ‘ Despite the UK already having the most punitive fuel duty levels in the EU, any thought that pump prices would rise further if Brexit became a reality is a red herring’. ‘If the pound does not crash, contrary to the pro-EU doom merchants predicting, and oil remains low due to overproduction, then it will still be down tp George Osborne how we pay at the pumps’.
The Brexit campaign predicts that the AA’s prediction of an increase of 19p per litre is a worst-case scenario and that actual increases could be as low as between 2p and 4p per litre according to an alternative AA and RAC statement. If the pound were to strengthen then we could even be paying 2p less.
It seems that there is a broad argument that fuel prices will increase but that most of the speculations and predictions are based on assumptions that the £ will crash…..If it does crash, it may well only be for a period while it recovers. It may not crash at all. Both Brexit and Bremain have compelling arguments.