Best Of

Rising fuel prices are great for the chancellor all that tax ontop of tax.

This crisis does afford an opportunity to the government to re-set fuel duty structures.

Pump prices have been historically low for some time, after repeated freezes of duty and that “temporary” 5p cut that never got reversed. From being some of the highest in Europe we are now among the lowest. Until this week they were the same in 2026 as in 2013, and that’s not even adjusting for inflation.

But raising fuel duty is always politically toxic, even if it’s just reversing a cut. It’s like abandoning the triple lock. However, a crisis means the possibility of a quid pro quo: if the government introduces an automatic stabilisation mechanism that essentially dulls volatility, easing peaks in times of high prices and moderating troughs, then if they set the range right they could help motorists now while booking a significant windfall down the line if, as seems likely, we enter another period of low prices.

Same logic has been discussed for North Sea ring fence taxation too, which would increase predictability and avoid situations like the current one (well, until Trump’s adventure) where the numbers don’t add up for investment.

Sadly the oil price drives global GDP more than it should, still. Far less than in the 1970s, but still a lot.

Very strong negative correlation between global GDP and crude oil price with a 6-12m lag, with the pattern repeating everywhere except the major commodity exporters.

The US is less affected as it’s now the world’s biggest oil producer. It’s possible to argue that US domestic oil and gas production and exports explain almost the entirety of its GDP performance gap with Europe and Japan in the period since the financial crisis.