A very moderate suggestion (Part 2) – Increase the price of petrol

Since this piece has been judged to be too shocking for release during the “purdah period” (for those outside local government, this is the ban on statements with political implications before elections) we present this on the day after the 2010 General election.

 But really, it IS a very moderate suggestion.

 So, let’s look at the price of fuel for motoring. Apparently it has been rising dramatically, “hammering” the UK motorist. For example, in early April the Guardian (“This week the AA warned that the average cost of a litre of petrol is on course for a record high of 120p”) published – courtesy of the press releases from motoring organisations – the apparent massive rise in the cost of petrol as follows: 

PETROL PRICES

Cost per litre (pence)

1960

5.18

1970

7.15

1980

26.39

1990

40.92

2000

80.84

2010

120

 So that’s a pretty dramatic increase in costs for drivers, isn’t it? No, actually it isn’t.

 Let’s look at this in terms of what are often referred to as the “real” costs.

 Firstly, we look at a price in terms of inflation. Using one of the recognised indicators, the Retail Price Index (gained from the Daily Mail, just to show how unbiased I am), the picture is somewhat different: 

PETROL PRICES Cost per litre (pence) Inflation (RPI) Daily Mail percentage with 2010 at 0 Price now: Equivalent with inflation factored in

1960

5.18

1,611

91

1970

7.15

1,111

86.5

1980

26.39

273

88

1990

40.92

83

74

2000

80.84

28

103

2010

120

0

120

 Still an increase, but not so dramatic.

 Secondly, let’s look at another indicator: Average income using the Average Earnings Index (figures go back to 1963):

PETROL PRICES Cost per litre (pence) AVERAGE EARNINGS INDEX (2000 IS 100) Price now, factoring in average earnings, based on 2010 price

1960

5.18

c.3 (1963=3.9)

235

1970

7.15

6.5

150

1980

26.39

27.4

131

1990

40.92

63.9

87

2000

80.84

100

110

2010

120

136.4

120

 Here the change from 1960 until now is actually downwards for all but two of these years – not much up from 2000, with the only significant increase some 35% up from 1990.

 But even this is an underestimate for – wait for it – just how cheap petrol is compared to its cost previously. This brings us to the third way of trying to get a picture of that elusive price – the “real” price.

 Let’s go back to the Retail Price Index. This is one of the measures used to calculate inflation based on considering different items that people spend money on. What is generally absent from any discussion of calculating this type of index is the absence of house prices – the biggest single expenditure for most of us. Everybody knows that, against any measure of inflation, the cost of buying property has massively increased over the period from 1960. (I’m not considering rented accommodation, although I believe that to have also increased).

 o factoring in the cost of buying property, the picture is of – if anything –a decline, or at least stabilisation, in the cost of fuel in what most people would think of as real costs.

 But the picture is even more of an opposite when we consider the overall costs of motoring. These really have gone down – which is one of the main reasons (along with transport planning policies such as road building, which encouraged motoring) why there has been such a dramatic increase in the use of motor vehicles in general and cars in particular.

 This brings us to the fourth point to make in this argument: the cost of fuel is only part of the cost of burning fuel. Getting away from the hysteria of “rising fuel prices”, one of the most obvious features of the UK motoring scene  – apart from the massive increase in motoring – has been the appearance of fuel inefficient vehicles like SUVs running at c. 20 m.p.g., while at the same time far more fuel efficient vehicles have become available, For example the Honda Insight at 102 mpg (2.75 litres per 100 km) ; and the Civic  at 85 mpg , from 1993 http://www.brookes.ac.uk/eie/cleancar.htm .

 In other words, with more fuel efficient, even if the cost of a litre of petrol goes up, the cost per mile need not. In fact, the reason why more fuel efficient vehicles are not more extensively bought – and why very fuel inefficient ones are – is that fuel is so cheap. This article http://www.informaworld.com/smpp/content~db=all~content=a739364852 examines how more fuel efficient vehicles have not been purchased in the UK, even when they have become available.

 But it gets even worse for people who claim that fuel is too expensive. The fifth point to make is that:

 The brutal truth is that the consumption of fuel can be dramatically reduced by driving properly. Consider the following recent description of how a typical driver can save some £800 per year by driving properly:

http://www.guardian.co.uk/money/2010/may/01/save-800-pounds-year-petrol .

 And yes, there is even more: my sixth point is that driving a smaller, more fuel efficient car, and driving it more carefully, will massively reduce insurance costs. I haven’t even talked about reducing some car journeys…

 I think all the above leads us to a clear conclusion: fuel prices could increase quite dramatically without a very significant reduction in car ownership, and with only a minor reduction in motor traffic – although I would argue the latter in particular is desirable.

 Meanwhile, the main political parties have refused to consider increasing the cost of fuel. Only the Green Party has proposed an annual increase of some 8% (currently 10p a litre), which would lead to a doubling of fuel prices over the next two (4 year) parliaments. By that time even more fuel efficient cars will be available, cars will be due to be changed, more advice on driving properly will be available, etc. in other words, this move would not necessarily lead to a reduction in motor traffic and just it’s stabilisation. There is a strong case for steeper rises – along, of course, with other traffic reduction policies.

 One of the advantages of living on an island is that fuel prices can be raised effectively. One of the problems with British post-war transport policy is that petrol rationing was ended before it was in other places in northern Europe which have developed less car-dependent transport systems. There may well be issues around the poorer motorists (although most of those in poverty don’t drive); some rural communities car use, and other issues such as the desirability of carbon rationing instead.

 But for those interested in an equitable, sustainable and healthy transport policy, significant rises in the cost of fuel should be right on the agenda. Even before discussions about how much extra we all have to pay in times of austerity.