Petrol prices set for major rises in 2010

Petrol prices are set for a 5p-per-litre hike over the first three months of 2010, and potentially twice as much by the end of the year, a fuel retailers' group is warning.

The possibility of a 10p-per-litre rise in 12 months is from tax and duty rises only, and does not take into account any rises in the oil price, says the RMI Independent Petrol Retailers Association.

Half of the most immediate 5p rise will be accounted for by the end of the VAT holiday on 1 January, taking the rate back up to 17.5 per cent. But there are also significant jumps in fuel duty planned for the coming year. At the start of April, fuel duty will go up in line with inflation, plus an extra 1p per litre – thanks to the re-introduction of the unpopular fuel price "escalator" in last year's Budget. Further, the withdrawal of a duty incentive to refiners producing biofuel will also likely be passed through to consumers as a further 1p per litre price rise.

The parlous state of the public finances raises the spectre of extra taxation. The further VAT hike, to 20 per cent, mooted in the City would add a further 2.5p per litre to petrol, and a snap post-election Budget could see duty pushed up by another 2p per litre. "With all of these duty and VAT factors considered, this will equate to a 5p per litre increase in fuel prices by the beginning of April 2010 with the possibility of up to a 10p per litre rise, solely from UK taxation, by the end of 2010," the RMI says.

"Brace yourselves for higher fuel costs ahead," said Brian Madderson, the chairman. "2009 has been a tough year for consumers and we are now looking at an even tougher year ahead."