Oil prices have being dropping recently so now we should all be looking forward to much cheaper fuel for our cars. How does the reduction in the cost of the crude oil transfer to us ordinary people? Crude oil now costs $70 a barrel, but a little over a year ago stood at $140 per barrel.
Where did this reduction go?
The truth is we don’t get the the % drop in the price at the pumps which we think we should .
This is the breakdown in % terms, on where the money goes!
- 57% – Duty and tax: Paid directly to the Government . (The monetary amount per litre does not drop as the crude price drops. This is a set amount by Government)
- 36% – Oil exploration Company: To source and refine the crude oil to make it usable.
- 4% – Oil Company: To Market and Distribute the fuel.
- 3% – Retailer: To stock and sell fuel to the end user. (Source: www.ipra.ie)
The price of crude oil is not set to rise anytime soon, nor can we expect to see a huge drop in fuel price at the pumps due to the fact that the tax take is set by Government as a fixed monetary amount per litre and not aligned in % terms to the price of crude oil.The reduction will only come from the portion which is dependant on the crude oil section which is 43%.
Ever country adds tax and duty to the sale price oil as it is a necessary source of tax revenue to help run the state.
This may vary from country to country depending on where you live, but it is quite standard in most European countries, some take more than Ireland and some take less.
The fact that our VAT rate here in Ireland is 23% also contributes to the high price of our fuel at the pumps.
Unfortunately tax is a necessary evil, so if the government reduce the take on fuel, have no doubt but they will add it on to something else.