10 September 2015

AFRs largely cut, but fuel price falls may have hit the end of the road

Advisory Fuel Rates (AFRs) have typically been cut by HM Revenue and Customs (HMRC) following recent falls in fuel prices, but it could be the end of the road for cheaper petrol and diesel.

HMRC revises AFRs quarterly and has this week published the applicable rates for the three months from 1st September.

AFRs apply when employers either reimburse employees for business travel in their company cars or require employees to repay the cost of fuel used for private travel.

Petrol rates across the 1400cc or less range have reduced by 1p, rates across the 1401cc to 2000cc and over 2000cc remain unchanged. Diesel rates across all the bands have been decreased by 1p. The rates for LPG vehicles reduce by 1p across the 1401cc or less band, while rates across the 1400cc to 2000cc and the over 2000cc bands remain unchanged. Hybrid cars are treated as either petrol or diesel for AFR purposes (see chart below).

Advisory Fuel Rates September-November 2015

Engine sizePetrolLPGEngine sizeDiesel
1400cc or less 11p(12p) 7p(8p) 1600cc or less 9p(10p)
1401cc-2000cc 14p(14p) 9p(9p) 1601-2000cc 11p(12p)
Over 2000cc 21p(21p) 14p(14p) Over 2000cc 13p(14p)
  • Previous quarter’s AFRs in brackets

Meanwhile, a new 12-month oil low of $41.87 in the last week of August helped to bring the average price of petrol down by 4p a litre for the month to 112.42p, according to the latest RAC Fuel Watch data.

Diesel also continued to drop throughout August with a further 5p being shaved off a litre taking the average cost down to 110.40p, still keeping it below petrol. This means motorists are now paying £2 less to fill up an average family-sized petrol car than they were at the start of the month and £2.60 less for a diesel car.

However, it could be the end of the road for fuel price reductions as OPEC – the Organisation of the Petroleum Exporting Countries which produces 40% of the world’s oil – has said it is willing to meet with other oil producers to discuss a ‘fair’ price for oil. The barrel price has already rebounded and is continuing to trade up around $48 so prices may not see a low of $41 a barrel again.But while there may be no further cuts in fuel prices RAC fuel spokesman Simon Williams said: ‘Due to the global oil over-supply situation we are in, pump prices look unlikely to return to the all-time high levels of 142p for petrol and 147p for diesel experienced in April 2012 so the cost of driving should continue to be cheaper for some time to come.’