Air fares set to rise

Due to the soaring cost of oil, airlines could be forced to add an emergency surcharge to tickets. Times article states: "Virgin Atlantic said that if oil prices continued to rise it would have to be reflected in the ticket prices. But we do not have any firm plans at the moment."

The article also states that BA's fuel bill will reach £1 billion this year and that:

"The impact of the oil price is seen as more damaging to BA than to other major airlines because the company did not fully insure itself against a large rise, a process call hedging."

Full article at:

http://www.timesonline.co.uk/printFrien ... 24,00.html

[Nottingham Nick]

I don't think VS will be on their own if this happens.

The way unleaded is going up in price we could be on our way back to blockades and protests soon[:(][:(]

Nick

[Pete]

If oil is sold on a global market, I still find it hard to understand why we get such a raw deal in the UK.

Petrol costs around $1.96 per gallon in the US (that's the price now at Costco in Folsom, CA, if you'd like to check), That's 51.7c per litre - or 29p at today's exchange rate of 0.5599 (FT.com). Compare that with the BBC's recent reports of an average of 80p per litre in the UK, and I'm surprised the blockades aren't out there already!

The last blockade didn't really effect the fuel companies that much - all they saw was binge buying, rather than any real effect on their profits. I did read a proposal shortly after the blockades that made a lot of sense. Rather than blockade, boycott the big guys (BP, Shell, Esso). The desired effect was to get the big fuel companies to take action since they wouldn't want to lose the business.

Oopps, this is getting *way* off topic...

Pix

quote:Originally posted by pixuk
Petrol costs around $1.96 per gallon in the US (that's the price now at Costco in Folsom, CA, if you'd like to check), That's 51.7c per litre - or 29p at today's exchange rate of 0.5599 (FT.com). Compare that with the BBC's recent reports of an average of 80p per litre in the UK, and I'm surprised the blockades aren't out there already!

At the risk of perpetuating an off topic thread, low petrol prices in the US is viewed by a large part of the population as a god given right. But with 4% of the world's population the US creates 25% of the world's greenhouse gases. A large swathe of the population is obese and car dependent (and probably warm grease dependent too) and many major cities make no provision for pedestrians.

I'm more than happy to live in a country where taxation on petrol relfects some of the damage it does to our environment and where both local and central government encourages the population to walk and/or use cleaner forms of transport.

BC

Oh dear Blackcat, we are going to disagree!
The taxation on fuel does NOT go to making the roads better, nor sustaining other forms of transport, it goes to the governments big pot and they then waste it on stupid things, based on their politics.

quote:Originally posted by AlanA
Oh dear Blackcat, we are going to disagree!
The taxation on fuel does NOT go to making the roads better, nor sustaining other forms of transport, it goes to the governments big pot and they then waste it on stupid things, based on their politics.

I didn't say it went on making the roads better, just that it reflected the damage done to the environment. Which it does, to some extent at least. The fuel escalator was brought in by the Tories in 93 as a means both of raising money and attempting to discourage car use.

In any case, as you point out, taxation is rarely ring-fenced by central government, be it fuel duty, national insurance, income tax, stamp duty or whatever. In fact, under the current division of road maintenance responsibilities between local and central government it would not be practicable to have a direct link.

And all governments gather taxes and spend it on policy implementation. That's what government is. If you happen to disagree with the policies of the current government then you can exercise your democratic right at the next election and vote in a different one (although one might suggest that there is currently very limited choice!)

Anyway, my point was about US petrol prices and the issue of comparing with UK pricing:

The US government's annual subsidy of the highways (i.e. costs not borne by the motorists) is over $100B
If US motorists actually paid for the cost of highway maintenance and parking then the price of a US gal would go up by $3.50
Motor vehicles account for over half the airborne pollution in the US
The oil industry in the US has huge (over $15B-$20B) Federal tax subsidies

I just do not think that comparing UK and US gasoline prices is a useful comparison: the countries have massively different infrastructures, taxation regimes and approaches to the environment.

BC

Without wishing to start an argument Blackcat, one quick question: Does your "taxation on petrol relfects some of the damage it does to our environment" policy extend to air travel? Aviation is a great source of pollution. Airlines, and thus us, the passengers are exempt from paying for the consequences. A study after 9/11 found that daytime and nightime temperatures were up to 5 degrees different from normal because no planes were flying.

quote:Originally posted by JonBuck
Without wishing to start an argument Blackcat, one quick question: Does your "taxation on petrol relfects some of the damage it does to our environment" policy extend to air travel?

Firstly, thanks for dragging me back on topic!

Anyway, not my "policy". As I mentioned, the fuel escalator was brought in by the Tories in 1993 and has been extended by the Labour government. So taxation reflecting environmental damage has been the policy of three successive British governments.

However, aviation fuel is the fastest growing source of greenhouse emissions; currently it accounts for 3.5-4.0% of all human induced global warming. And yet, aviation fuel is free of tax and air travel also benefits from zero-rated VAT.

In short, aviation is under-taxed compared to other sectors of the economy. In fact, the aviation industry is effectively subsidised to the tune of £9.2B in the UK, and less than 10% is recovered through Air Passenger Duty which was also brought in during 1993 as a form of environmental tax.

However, airline tickets keep getting cheaper. 9/11 perhaps provided some extenuating circumstances in the market, but the reality is that a range of policies are under consideration including fuel taxation (likely to be introduced first for domestic travel), ticket taxation (like the APD), emissions charging and emissions trading to meet stated emissions quotas.

If the approach was only limited to APD then the implication is that long haul APD would increase by at least 75% with a smaller increase for short haul. DrKW have modelled the impact as leading to a 1.6% reduction in passengers for BA but a much larger reduction for the more price sensitive low cost carriers.

Whatever happens, it does see inevitable that the aviation industry will have increased taxation over the next few years. However, from a passenger perspective this is likely to be no more than a few quid per ticket.

BC

BC
I was actually saying that all governments waste the tax they currently bring in. Also, my comments were that in Europe we are taxed mainly, more than the rest. Actually to me Taxation is theft anyway
The trouble with APD is that unless it is worldwide, certain airlines will get an advantage over others. You know that this government will put on a higher tax than other countries [}:)][}:)]

quote:Originally posted by AlanA
Also, my comments were that in Europe we are taxed mainly, more than the rest.

If you are talking about car taxation then the UK is in a median position for the average tax burden over the lifetime of a car. The overall tax burden is very similar to France and Italy, and much less than Netherlands, Finland, Denmark and Ireland. Taxes on use are relatively high (though not the highest) but taxes on ownership are very low.

Comparing general tax burdens across Europe is notoriously difficult
to do since the tax structures in member states varies so widely. For example, Nordic countries have high levels of direct taxation whereas Ireland, Portugal and Greece have high levels of indirect taxation.

In any case, as a percentage of GDP and as implicit rates on both labour and consumption, the UK has taxes that are almost precisely in the middle of the table. Our tax on capital is higher than the average, but not as high as Luxembourg or Finland.

So no, we are not taxed "more than the rest".

BC