02nd December 2004

CHANCELLOR’S PRE BUDGET STATEMENT ON SULPHUR FREE FUEL DUTY DISAPPOINTING

UKPIA, which represents the main oil refining and marketing companies in the UK, expressed disappointment that the Chancellor, in his pre Budget statement today, has decided not to implement the duty differential for sulphur-free petrol and diesel (less than 10 parts per million sulphur). The Chancellor first announced his intention to introduce a lower rate for sulphur-free fuel, in comparison to the current ultra low sulphur fuels, in his 2002 Budget and this was confirmed in both his 2003 and 2004 Budget statements.

Confusion
Chris Hunt, Director General of UKPIA, commented “ Our member companies have been investing substantial sums at refineries in readiness to start producing these new fuels from September 2004, mindful of the Government’s wish to see them introduced in the UK ahead of the EU mandated timetable of availability on a balanced geographic basis from 1st January 2005 and complete availability by 2009. Introduction of these new fuels requires long lead times and careful planning of production, distribution and storage to ensure a smooth transition with no impact on consumers.”

He concluded  “Uncertainty over the direction of Government policy creates confusion so we look forward to an early decision from the Government on how these new fuels should be introduced.”

Additional notes:
The Chancellor first announced an intention to reduce the duty on sulphur-free fuels(less than 10 parts per million sulphur vs current 50ppm or less) in the 2002 Budget. In his April 2003 Budget he announced his intention to introduce a duty incentive for sulphur-free petrol and diesel. This was confirmed in his March 2004 Budget announcing a duty rate 0.5 pence per litre lower than that applied to current ultra low sulphur fuels, with effect from 1st September 2004. This reduction was in recognition of the fact that sulphur-free fuels cost more to produce than current 50ppm fuels.

In response to a Commons written question, on 20th July 2004 Treasury Minister John Healey said that the proposed duty increases and the differential for sulphur-free would not be applied on 1st September 2004 but would be reviewed again in the Chancellor’s pre Budget statement in the light of crude oil and petroleum product prices.

The introduction of cleaner fuels over the last decade has enabled the use of new engine and exhaust clean up technologies bringing about a substantial reduction in exhaust emissions.

Sulphur-free fuels will optimise the potential benefits of new engine technologies such as petrol direct injection and exhaust de-nox catalyst clean-up technologies, with consequent benefits to fuel efficiency and CO2 reduction.