Petrol prices have soared recently, threatening the way of of life in the UK. At the same time BP declare $16.2 Billion profits of which $8.7 Billion are from increased oil prices (BBC News). These are obscene profits and so we all blame them. But should we?
The Parable of The Drug Pusher
A man is introduced to heroin. After a while he cannot function without it. The drug pusher sold him the first score cheap, then charged more and more as time went on. The addict, had to find a way to pay for the heroin, because he was hooked and could not get through life without the drug.
One day the police arrested the drug dealer. During his court case, the drug dealer said that he had hiked the price to discourage the addict, being concerned about his health and welfare. This carried no sway with the jury, who found him guilty. In summing up, the judge tore into this defence for trying pass greed off as concern.
The dealer was sent down and the addict was gradually weened off the heroin through methadone prescriptions, ultimately adopting a life-style which was not drug fueled.
We are all entirely dependent upon petrol and individually we are as hooked to the stuff as a heroin addict is to smack. I cannot run my business without a car, my wife has a job and takes most of the responsibility for ferrying the children around; this is not possible without a car. We live in the countryside. We cannot survive without a car. There are no village shops any more. Buses come infrequently and at bizarre times. We have to go to out-of-town supermarkets to get everything from food to football boots as do all of us, no matter where we live. The overwhelming majority of people, whether urban or rural folk, have no choice. We have to buy petrol no matter how much it costs.
Dividing the Oil Spoils
Petrol actually retails at 57.65p per litre. The government add 120% to that (69.35p) in taxes so that we get to pay 127p per litre at the pump. (petrolprices.com | Tax tables).
It breaks down to:
Fuel Cost: 127p
VAT: 19p
Duty: 50.35p
Government gets: 69.35p (55.6%)
Actual fuel cost: 57.65p (44.4%)
Last week it cost me £70 to fill my car up. £38.92 went to the government. £31.08 went to BP. Every time it goes up, so does the VAT component of that. Incidentally, the fuel duty will rise by a further 2p per litre once all the governments’ MPs stop worrying about losing their seats at the next election.
It’s All About ‘Green’ Backs
The government know we are hooked on petrol. They do not make the prices rise, but they do rake it in when it happens. They tell us that the massive fuel duty (amongst the highest in the world) is something to do with encouraging greener living. But somewhat like the heroin addict, we have no choice. We have to buy this energy narcotic, no matter how much it costs. The government are being disingenuous to suggest that fuel duty is all about concern for our environmental welfare.
I don’t believe it anyway. If the government want to save the environment, they should turn on their collective TV and look at the Olympic stadium pictures from Beijing. They should then apply an environmental tax on Chinese goods. The pollution produced in the manufacture of Chinese goods renders car fuel pollution in the UK a meaningless.
Happily in the parable of the drug pusher, the addict was provided with a viable route out of addiction and had an alternative lifestyle option. Unhappily we have no such escape. The latest injection of genius from the government proposes we should replace our cars for brand new, more fuel efficient ones. If we don’t it could mean facing an annual bill of £800 for car tax.
And what’s in it for us? More expense to buy a new car. Then we have to absorb the instant devaluation on our old cars which will have been rendered gas-guzzlers and therefore unsalable. All to achieve what will be a 15% cut in fuel use. If it costs you £15000 to buy a new car and you do 12,000 miles per year, you would have to drive it for between 8-10 years before you had made up the cost in fuel savings.
Does anyone win? Well yes the government do. They get more tax and duty from the sale of new cars and old ones. They will get more car tax money from those who cannot afford to make this change and they still rake it it in from fuel duty. In the meantime the environment will remain in a parlous state because everything still runs on petrol and no one is doing anything about China!
Driving Profits
Certainly BP make huge profits. but they do not make much profit from petrol sold through forecourts. Their profits are largely derived from exploration, drilling and refining. And is $16 Billion too much? You would expect their profits to be straospheric, they are after all a global company. And let’s be realistic, their objective is to make good profits.
Talking of realistic, the government also taxes those profits, making further billions for the country from us (indirectly) through them. If some of BP’s profits need to be off-set against increased fuel prices, then look to the government. They have not only taken tax from BP and fuel duty and VAT from us but they actually exist to do these things on our behalf.
Slick Behaviour
We should not be complaining at BP for being successful. We should be buying shares in them. We should, however, be holding the government to account for profiteering at the expense, and misery of the very people whose best interests they are elected to represent. It’s a slick trick, because they get away with it. The environment is a holy cow, if you disagree, you get metaphorically tarred and feathered for being ungreen. In truth we ought to pour oily scorn on the government for using a petrol addiction to generate revenue while waving an environmental flag for effect.
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