–UK Petrol Prices Rise 2.7% On Month In December
–Petrol To Add 0.1pp To UK Dec y/y CPI Change

LONDON (MNI) – The rise in petrol prices picked up pace in
December, rising 2.7% on the month, according to the Market News
Petrol Price Index.

Petrol price inflation has returned, with increases in fuel duty
and Valued Added Tax set to drive prices still higher in January.
although base effects should cushion the impact on January’s CPI.
According to the Market News index, petrol prices will add 0.1
percentage point to the annual change in CPI in December.

In December, with oil prices rising above $90 a barrel and sterling
under pressure, petrol pump prices were pushed higher.

In January, other factors will ensure petrol is even more costly.
The 3p fuel duty rise originally set for early last year was, in the
end, phased in and fuel duty went up 0.76p per litre on Jan 1 this year.

Throw in a rise in VAT to 20% from 17.5% on January 4, and fuel
prices look set to be markedly higher through January. The Automobile
Assocation estimates the combined effect of the VAT and fuel duty rises
will add around 3.5 pence to a litre of petrol in January, a little more
than the 3.1 pence rise in the cost of unleaded petrol in December.

Base effects will cushion, to some extent, the impact of rising
petrol prices on inflation. The official data show the personal
transport fuel and lubricants sector, which is largely comprised on
petrol prices, rose 0.2% on the month in December 2009 and then spiked
2.3% in January 2010.

This should diminish much of the impact of the forthcoming January
rise on headline inflation.

The Market News Petrol Price Index reflects the fact National
Statistics uses a monthly average for CPI fuel prices, unlike for the
vast majority of other categories, where it uses a single day collection
point.

The Market News Index is based on average monthly data supplied by
Experian, with weights for various petrol categories, such as unleaded
and super unleaded, obtained from the Department of Energy and Climate
Change’s Digest of UK Energy Statistics (DUKES).

The correlation between the MNI index and the moves in the fuels
and lubricants category in the official CPI data, has been strong in
recent months.

Below are the results of the MNI petrol price index:

% change m/m 2010

! Dec ! Nov ! Oct ! Sep ! Aug ! Jul !
————————————————————————
MNI PETROL PRICE INDEX 2.7 1.5 2.1 -0.7 -0.9 -0.7
ONS FUELS/LUBRICANTS n/a 1.6 1.8 -0.8 -1.0 -0.7
MNI Index Contibution
to CPI y/y Change 0.1 -0.05 0.11 -0.12 -0.08 -0.06
ONS F/L Contribution
to CPI y/y Change n/a -0.04 0.10 -0.13 -0.08 -0.05

—London Bureau; Tel: +44207 862 7491; email: drobinson@marketnews.com

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