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Why are prices at the pumps soaring?

PUBLISHED: 14:53 05 June 2018 | UPDATED: 17:34 05 June 2018

Prices are soaring at the pumps but any short-term reprieve is likely to come from the retailers rather than government
Photo: Contributed

Prices are soaring at the pumps but any short-term reprieve is likely to come from the retailers rather than government Photo: Contributed

Archant

The price at the pump is a frequent headache for politicians.

Fuel is rightly viewed as a necessity especially in rural communities where travelling by car is the only option. Petrol poverty leaves people – often the most vulnerable – stranded.

But why are the prices soaring and what can the government do about it?

There are several reasons for the current spike in the cost of petrol and diesel. But there is no obvious fix Theresa May’s government can quickly implement.

Escalating tensions in the Middle East are the obvious reason behind more than three weeks of daily rises in the price of fuel. There has been a general upward trajectory since US president Donald Trump withdrew from the Iran nuclear deal on May 9. This move led many to believe a war between Iran and Israel was far more likely.

The re-election of socialist Nicolas Maduro in Venezuela and Mr Trump’s fresh sanctions on the country have also had a direct impact on prices.

Another issue is the state of the pound against the dollar because oil is traded in the US currency.

Mrs May opposed the scrapping of the nuclear deal and can do little about the situation in Venezuela. And the continued uncertainty surrounding the Brexit negotiations will not help the pound climb in the short-term.

Mrs May could push for a drop in fuel duty to ease the pressure – it would certainly be a popular move with the public if not her neighbour the chancellor.

Fuel duty represents a significant source of revenue for the government – an estimated £28.2 billion will be made in this financial year. And chancellor Philip Hammond will also highlight the tax has remained frozen at 58p per litre for six years.

Expect renewed calls for an independent fuel price regulator who would have the power to cap costs during times of soaring prices. But the Conservatives are unlikely to want to directly intervene in such an aggressive manner.

The great hope to beat the hike then lies with the supermarkets. They already only make a small profit on fuel but will be eager to tempt customers into their stores with the lure of cheaper petrol especially with a lucrative football tournament looming.

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