UK Government Urges Energy Firms to Drop Petrol Prices on Lower Oil Costs

Britain's government will urge energy firms to lower petrol prices as the price of oil has fallen from around $115 per barrel (bbl) in June to the current $84/bbl.

Chief Secretary to the Treasury Danny Alexander will argue that the recent fall in petrol prices is not enough as fuel costs were only lowered by 6% to around 124.22p, from 131.70p, despite oil falling by around 25%.

"I believe it's called the Rocket and Feather effect," Alexander will say in a speech to the Highlands & Islands Branch of The Energy Institute in Aberdeen.

"The public have a suspicion that when the price of oil rises, pump prices go up like a rocket. But when the price of oil falls, pump prices drift down like a feather."

Despite the 'Rocket and Feather' effect dominating many consumers' opinions over the correlation between petrol and oil prices, there is no evidence to support this.

Oil is traded in US dollars so Britons would be susceptible to foreign exchange volatility.

During the period referenced in the speech, the pound has weakened against the dollar, meaning Britons would not have felt the sharper decline in oil prices.

Furthermore, 65% of the average 124.22p per litre comes from government tax, while an additional 20% VAT rate is applied.

"Our calculations if you take fuel duty out of the equation because oil has dropped by about 25% to 30% in the last 4 months," said Howard Cox founder of FairFuelUK.

"The pump price - which is currently averaging for petrol 124.9p - should be at lower at least 114.9p possibly even less with diesel about 3 to 5p more. We believe oil speculators are stopping the price decrease happening quicker for their own profiteering motives."