Petrol firms 'too slow to pass on price reductions'

Petrol companies which fail to pass on reductions in crude oil prices should be named and shamed, an influential committee of MPs yesterday told the Government. The all-party trade and industry select committee said there was a "widely shared perception that pump prices are quick to rise but slow to fall".

Petrol companies which fail to pass on reductions in crude oil prices should be named and shamed, an influential committee of MPs yesterday told the Government. The all-party trade and industry select committee said there was a "widely shared perception that pump prices are quick to rise but slow to fall".

They warned that producers "do not seem anxious to make the first move to lower prices" and said the Government should "keep a close watch on the relationship between the price of crude oil and that paid by customers".

The committee's investigation into the impact of fuel taxation on British business was launched last September, following the oil refinery blockades that emptied petrol pumps across the country.

The MPs questioned protesters, farmers, hauliers and oil company executives. They backed claims by fuel blockade leaders that hauliers and farmers are being crippled by high petrol prices, but found no conclusive evidence that petrol tax damaged industry.

"The fuel crisis made life uncomfortable and more problematic. But taxation itself is not the real problem, so long as demand for fuel remains relatively inelastic," said the committee's report. But it went on: "UK-based hauliers are losing their competitive edge against other European hauliers in respect of international journeys as a result of high fuel taxation."

The increase in typical pump prices from around 43.3p a litre in 1992 to 76.9p now was "entirely and intentionally the result of Government taxation policies", said the report.

Tax made up 78.4 per cent of the cost of unleaded petrol at the pump, compared with 66.5 per cent in 1992, the committee found. But there was no evidence that high petrol tax was helping the environment by cutting consumption. "If one intention behind high fuel taxation is to reduce the amount of petrol sold, the evidence available to us is ambiguous as to whether it is working."

There was no evidence available that this had led to a decline in the international competitiveness of British retailers and coach companies. The MPs warned: "Companies heavily reliant on road transport, particularly small companies, will inevitably be hit hardest by high fuel taxation levels. In some sectors and in rural areas, rises in fuel taxation can be the straw which breaks the camel's back."

But they said it was difficult to isolate the impact of fuel prices on the agricultural crisis. "The high proportionate increase in the price of red diesel arose, not as a result ofmotor fuel taxation rates butincreases in the price ofcrude oil."

Fuel costs made up more than 10 per cent of the cost of dairy products, compared with just 1.4 per cent for the telecommunications industry.

The committee said there was "extensive anecdotal reporting of haulage companies going under," but there was no official evidence to support that..

There was "serious disruption" being caused by differential tax rates in Northern Ireland and the Republic. "Petrol retailers are having difficulties of various sorts, with very low margins, competition from supermarkets and disagreements with the big oil companies. In Northern Ireland their plight is exacerbated by cross-border purchases."