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Oil madness: Why we must avoid fuel duty cuts 

Published 23 March 2022 by Rachel McFarlane

“Addiction to fossil fuels is mutually assured destruction”: Transform’s communications officer Rachel McFarlane sets out why cutting fuel duty is not the answer to the Ukraine crisis. 

The UN Secretary General Antonio Gutterres’ vital reminder this week that we must not revert back to large-scale fossil fuel consumption as a result of the Ukraine crisis, contrasts with the widespread opportunistic demands for leaders across the EU and UK to drill more oil and slash taxes on oil and gas.

Why we must avoid fuel duty cuts 

Just under two weeks after the Russian invasion of Ukraine, the United Kingdom announced that it would stop importing Russian oil and gas by the end of 2022; the United States said they would stop all imports instantly, and many EU member states committed to phasing out Russian oil by the end of the decade. 

This is a ban that we fully support. In fact, in early March the Transform team stood alongside 25 other European NGOs, insisting that EU member states, as well as the UK, place an embargo on all Russian oil and gas imports in order to weaken Putin’s position in Ukraine.

However, politicians have been left to decide how best to deal with the short-term rising cost of oil and gas, with the Ukraine fuel price spike worsening the UK’s pre-existing energy price crunch.

One political response which has already been made by a number of countries (for example France, Australia, Sweden) has been to cut road fuel taxes. This has been packaged and sold by governments as a relatively easy step to alleviate financial pressures on consumers. 

However, new research published this week by Transport and Environment has found that this cut will actually result in the ‘richest 10% of drivers [receiving] eight times more in fuel tax cuts than the poorest, on average, because they consume far more fuel… Wealthier motorists drive more, often alone, and with larger, more polluting vehicles’

Cutting fuel taxes is therefore a regressive policy, as it:

  1. Benefits those already in higher income groups the most;
  2. Is based on the assumption that everyone in society owns and drives a car;
  3. Does not equate to a policy designed in the face of a climate emergency.

So what are the alternatives? 

There are many viable alternatives that could alleviate the strain of the rising cost of living for all, which also benefit the climate. These have been mapped out by Transport and Environment (T&E), and the International Energy Association (IEA), amongst others. 

Transport and Environment make the case that instead of cutting fuel tax, that import tariffs can instead be raised on Russian oil imports in order to ‘raise revenue for cash support to low-income households and boost Europe’s energy security’. Whilst this would only be for as long as Russian oil imports continue, it would help during the transition away from this energy source.

Car analyst at T&E, Griffin Carpenter also noted that “The easiest way to avoid high oil prices is to make it possible for people to drive less.” Griffin gives the examples that: 

  1. Governments should make homeworking a right;
  2. Public transport fares should be temporarily slashed; 
  3. To help lower-income households dependent on cars, governments should lower income taxes, increase mobility allowances or simply issue cash cheques to those who need it.

A great example of a country already implementing such changes is New Zealand, the leaders of which recently announced that they are halving public transport fares to ease the pain of rising fuel costs. 

The International Energy Agency also posted a ‘10-point plan to cut oil use’, which they argue, if put into immediate action by advanced economics, could reduce oil demand before its peak in July and August. They estimate that if all advanced countries were to commit to implementing their plan, that oil demand could be reduced by 2.7 million barrels a day in the next four months.

Mutually assured destruction

The UN Secretary General’s assertion that “Addiction to fossil fuels is mutually assured destruction”, reminds us that the steps taken by state leaders in the following months will not only influence the Ukraine war, but also our ability to avoid catastrophe in the face of climate change.

What cutting fuel taxes translates to is: ‘business as usual’, which in transport essentially means: ‘keep driving cars’. 

It is essential that we move away from this as our automatic response when gas and oil increase in price – and, in particular, when these resources are both finite and ecologically unsustainable. We are in a climate emergency, and any opportunity to promote genuinely transformative alternatives – such as affordable and reliable public transport for all – is paramount.

The UK picture: what’s next?

This afternoon, Chancellor Rishi Sunak will present HM Treasury’s ‘Spring Statement’ whereby he will make various announcements about the cost of living crisis and how he intends to alleviate its effects on Britain’s citizens. 

Remember that the UK Government has already frozen fuel duty rates for over a decade, cutting the real cost of motoring every year as a result. Meanwhile, rail fares have been increased above inflation every year.

While stories emerging from the Tory press suggest that Sunak does intend to cut fuel duty, this act of ‘oil madness’ will be compounded if he makes no commitment to at least some of the alternative, sustainable responses proposed by T&E and the IEA. 

Without action here, the UK Government will again be making sustainable transport lose out at the cost of defending cheap motoring.