Government urged to cut fuel tax as oil price soars to 13-year high

Motoring groups urged the Government to cut fuel tax in the Budget as the cost of crude oil hit its highest level since Iraq invaded Kuwait 13 years ago.

The price of a gallon of fuel on British forecourts exceeded the £3.50 mark yesterday. Oil jumped by more than $1 a barrel to hit $38.74 (nearly £25) a barrel – its highest price since 1990, in the build-up to the Gulf War, when crude peaked at more than $41. The latest rise could trigger another increase in the cost of petrol. So far this year a litre of fuel has jumped from 75.63p to 77.28p a litre, or £3.51 a gallon, according to Arval PPH, a car fleet owner.

Danny Clenaghan of Arval, said: "Tensions in the Middle East have resulted in the cost of crude oil staying well in excess of $30 per barrel and that has led to rising forecourt prices. This is a golden opportunity for the Government to win itself a lot of friends by reducing fuel taxes."

The AA motoring organisation said that the price was approaching levels that contributed to the mass fuel protests in 2000.

Richard Freeman, an AA spokesman,urged the Government to take motorists into account in the forthcoming Budget but conceded that a cut was unlikely. "The idea of increasing fuel tax would be unwise given that, in the short term, fuel prices will continue to rise while there is uncertainty over a war," he said.

Ray Holloway, of the Petrol Retailers' Association, said 80p a litre was a "psychologically important level" that the Treasury would be keenly aware of. "Even to raise duty in line with inflation would not be a clever political decision," he said.