Fuel duty rise halted

Wednesday, 21 July 2004 12:00 AM

The Treasury has confirmed that it will not be raising fuel duty this September.

Fuel prices were set to go up by 1.42 pence a litre in September to the dismay of motoring organisations who argue that UK motorists already pay the highest costs in Europe.

Oil prices have been volatile this year, in May topping $40 a barrel.

The high prices are due to a variety of factors, including increased demand from America and China, companies maintaining low reserve stocks and the tension in the Middle East.

At the beginning of June the Chancellor said he would be reviewing the annual fuel increase, and this review process has now been extended to November.

The meeting of Organisations of Petroleum Exporting Countries (OPEC) on whose decisions the Treasury had been planning to base their review, has been moved from July to September.

OPEC agreed in June to raise output by two million barrels, which had an immediate effect of cooling oil prices. However, crude oil prices have again begun to climb, with Bent Crude Oil currently standing at $38. OPEC's target price is $28 a barrel.

In a written statement to the Commons the Treasury Secretary John Healey said that: "The Government's focus since June 3rd has been on OPEC and oil producers and their responsibilities to meet their own targets on sustainable oil prices, and we have sought to await the outcome of this month's OPEC Ministers meeting before making a further statement."

"With the next meeting of OPEC Ministers now moved from July to September, and in light of the continuing uncertainty in the oil market, we have decided to keep the planned increase, including for sulphur-free fuel and rebated fuels, under review, and will report back further at the time of the Pre-Budget Report."

The Conservative Shadow Chancellor, Oliver Letwin, welcomed the news, saying it shows "Brown has agreed with us."

He added: "The Chancellor said it was not appropriate to raise fuel duty when fuel prices were volatile. They remain high and volatile. I am glad he has accepted our view that any rise would be unacceptable at present."

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