UK motorists set to be hit by rising fuel pricesAnnual family petrol costs to increase by £100

31 December 2010

Woman filling up Vauxhall Tigra with fuel

Fuel prices are set to soar in coming days

Motorists are being warned of the rise in price of fuel over the next five days, as a planned fuel duty rise on January 1 and the 2.5% jump in VAT on January 4 will push near record-high petrol and diesel prices further up.

The rise is expected to hit families with an extra £104 a year, totalling more than £1,700 annually, according to the AA. Which? has proposed a few tips and suggested some tools to use to help you tackle the increasing cost of fuel.

Why are fuel prices going up?

Petrol pump in car

Petrol prices have risen by 15% in a year

Fuel prices will rise initially tomorrow as the Government’s fuel duty increase goes ahead. This will add an extra 0.76p per litre for both petrol and diesel.

And on January 4, the increase in VAT to 20% will push the price of fuel even higher.

In total, the tax rises will increase petrol and diesel prices by around 3.5p per litre, according to the AA.

And there have been further warnings that growing crude oil prices could be passed on to consumers at the pumps, as freezing conditions in the US and mainland Europe could see the price of oil passing $100 a barrel.

At present, a litre of petrol costs an average of 123.98p a litre, and diesel is up to 128.20p a litre. In comparison, the average prices were 107.74p and 109.46p respectively this time last year.

The average increase of over 15% year-on-year has meant UK consumers have been spending £10m more a day on filling up, the AA said.

Government could feel the pressure of fuel price rise

Fuel pumps at petrol station

RAC Foundation warns motorists may cut-down on driving

The fuel price increase has sparked opposition from numerous bodies and foundations, with many calling for the government to support the nation’s 34 billion motorists.

The Conservatives had previously pledged to introduce a fuel duty stabiliser, designed to cut taxes on fuel when oil prices soar. However, this policy has not been brought forward and road hauliers are calling for the government to step in to alleviate the impact of the two taxes.

The Freight Transport Association (FTA) released a statement yesterday claiming the January 1 fuel duty tax rise, the third of its kind since April 2010, will push diesel prices to within four pence per-litre of the all-time highs reached in July 2008 and leave the freight industry with a £95m new year’s hangover.

Simon Chapman, FTA’s Chief Economist, said: “The Chancellor is treating the road freight sector as a bottomless well from which cash to bolster the public finances can be drawn. At the same time he has embarked on a savage set of cuts to transport infrastructure which will see spending on national road schemes fall by 45% and local authority budgets for capital schemes slashed.

“For the UK to trade its way out of recession its supply chains need to be cost competitive and its roads must provide reliable routes to market. Neither is achieved by a tax base spiralling well above inflation and a transport network starved of investment.”

Director of the RAC Foundation, Stephen Glaister, also warned the government that the rises could deter people from getting behind the wheel.

He said: “Given that each penny increase in fuel duty raises about an extra £500 million for the Exchequer, it is easy to see why the Chancellor is tempted to hike rates.

“But if the nation's 34 million motorists are pushed too far they will drive less and the Treasury could actually see their tax take fall. At the election there was much talk about a fuel duty stabiliser. Drivers will rightly be wondering what happened to that idea."

What can you do to beat the fuel price rise?

Woman filling up Renault 207cc with petrol

Find the cheapest fuel in your area

With the cost of petrol and diesel set to increase, it is essential you save money elsewhere on your motoring costs.

Firstly, research and find the cheapest fuel in your area. can do this for you, covering around 8,000 petrol station prices across the UK.

As well as looking at fuel prices, you should find out how economic your car really is. Most modern cars display your average mpg, but can sometimes not be entirely correct. Instead, use our simple fuel economy calculator to get a more precise reading.