Meeting the Petrol Industry

Off to the palace today, well actually the Palace of Westminster, to attend the UKPIA annual parliamentary reception and meet the Minister for Energy, Malcolm Wicks. The Petroleum Industry Association represents nine companies involved in the British downstream industry, in other words: refining, storage, distribution and marketing of petroleum products.

As well as MPs from a number of parties, people representing various related companies and associations were there. You would expect BP, Exxon and Shell but there was also the Chemical Industries Association and the Tank Storage Association.

You do not need me to tell you that the fuel market has been very volatile over the last year and this makes investment decisions all the more difficult. Producing petrol for our cars is a very capital intensive process and requires long term planning. Demand for petrol in Britain has been falling since 1990 – Britain is a net exporter of petrol – but demand for aviation fuel has doubled over the same period – Britain is a net importer of aviation fuel. Oil companies, to remain successful, need to adjust their refining capacity to meet these changes in demand.

The ETA has campaigned with other environmental groups over the years for the aviation industry to pay its way with regard to climate change. Not only does the industry pay no VAT but it can claim back VAT inputs. This amounts to a massive subsidy from the taxpayer to the aviation industry. No wonder it is booming. If government really addressed this issue then aviation fuel demand would be less then currently forecast and the oil companies would be less likely to convert their refineries to produce aviation fuel.

As part of the Transport Taxation Group (an association of environmental organisations and academics) the ETA is proposing evidence-based taxation on all climate change gases to ensure we can meet our targets to reduce these gases 80% by 2050. The earlier we begin the easier it will be.