Increasing petroleum costs in the U.K.

The price of gasoline is predicted to rise to 120 p. per l. within the next week according to the BBC. This is about 1.83 U.S. dollars per litre—about 6 dollars and 93 cents per U.S. gallon.  According to the BBC article, the pound’s value is falling at the moment, non-domestic fuel prices are rising, and an additional duty has been placed on fuel.  Additional tax incentives have been made there to encourage the purchase of low emission vehicles and duties have been put into effect to decrease the purchase of less fuel efficient vehicles.  In the U.K., the current average price of gasoline is 117.93 p l-1 and the current price of diesel is 118.51 p l-1.  Although, the additional duty that was added a few days ago is only a single penny increase, there will be two additional increases in duties in October and April.  The 3 p increase was supposed to occur all at once; however, Chancellor Darling chose to make the increase tiered.  While government revenues should be, in theory, increasing from this duty raise, the government subsidy for the production of biofuel has been eliminated.  As a side note, this will also increase petroleum prices because, by government mandate, all petroleum fuel in the United Kingdom contains some percentage of biofuel: this extra increase should amount to around 0.7p.

In April of 2008, Britain passed a law that mandated all diesel and gasoline contain two and a half percent biofuel, which was supposed to be increased to 5% by this year, according to N.P.R. Unfortunately, that increase was postponed.  Increases in biofuel content might be difficult for the U.K.  Unlike in the U.S., where between 20 and 30 percent of land used for agriculture is used for growing biofuels, the amount of land used for biofuels there is equal to about 2% of farmlands in Europe.  Production, though probably less likely to happen now that subsidies have been reduced, has yielded increased revenues for farmers of all crops in Britain.  N.P.R. interviewed George Munns, a farmer in England, about the impact biofuel production has had on him.  Munns told the reporter that, while he does not grow crops for biofuel production, the increase in biofuel crop prices has positively affected his own revenue from crops.  While the government mandated increase of biofuel quantity in petroleum based fuels is certainly good for the environment and for crop farmers in the U.K., the now obsolete subsidy for production of those fuels may not have the most beneficial effects.


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