The sharp increase in costs is certainly causing many people to think about fuel prices, and to demand that the government helps out. That isn’t surprising when you remember that the Tories promised to investigate a fuel price stabailiser (maifesto pg 24) before their unconvincing election win.  Almost every organization with any link to motoring is now pushing for a reduction in duty and for the government to ensure that prices are ‘stable’ – the AA , The Tax-Payers Alliance , The Road Haulage Assotiaition to name a few.

But there is at least one group calling for the government to keep the taxes and continue raising duty. The Green Alliance reports that for every penny reduction in fuel duty, the government’s income will reduce by £540million (link to pdf document) . With crude oil prices showing a steady upward trend, they argue that stabalising fuel prices would be unsustainable.

I agree with the Green Alliance, as a country we should not be funding car use which produces lots of carbon emissions. Instead we should be taxing emissions which will cause long term damage and using the funds to promote low-emission lifestyles. In  this case: local provision of services (so that people don’t have to travel),  public transport, development of electric and hybrid cars.

But there is a role for variable duty on fuel. Decisions like which car we buy or where to live relative to our work are long term decisions. They can be changed by long term trends in the cost of that choice. Short term price spikes however will not change lifestyles but will cause major cash flow issues for poorer people. Variable fuel duty could be used to help reduce the effect of short-term changes in price, whilst leaving an overall increase in duty in the long run.

The green alliance is right; the government cannot overcome the long-term upward cost of oil and it would bankrupt the country to try and do so. Instead they need to smooth the upward rise so that, for example each year the price rises by 10p. Whilst predicting the price of oil is difficult and fluctuations will not be totally removed, the price of petrol will go up. The governments job should be to help society get used to this idea. For people to change the way they live will take a while, but it has to happen.