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The fuel picture…

By / 2 years ago / Features / No Comments

Declining oil prices are unlikely to reduce the demand for electric or plug-in hybrid vehicles, says ALD International sales and marketing director, Stephane Renie.

Remember that while the cost of a barrel of oil may be falling, a high percentage of the retail price of petrol and diesel is made up of tax. As a consequence the full impact of falling oil prices is not always passed on to the consumer.

Fuel and driver taxes

I don’t think we will see any drastic change. Remember that while the cost of a barrel of oil may be falling, a high percentage of the retail price of petrol and diesel is made up of tax. As a consequence the full impact of falling oil prices is not always passed on to the consumer.

Remember too that some countries have fiscal arrangements in place designed to smooth out the cyclical rise and fall in oil prices. Such arrangements help insulate motorists from rising prices but also mean they do not benefit fully when prices drop.

The way in which company car drivers are taxed is continuing to propel them towards low or zero-emission vehicles. Benefit-in-Kind taxation may be linked to a vehicle’s CO2 emissions for example. Such an approach favours cars powered by batteries.

Electric advantage

Even with low oil prices, the cost of the energy electric vehicles consume per kilometre remains a fraction of the per-kilometre cost of the fuel consumed by a petrol or diesel engine.

Low energy consumption is not the only advantage that electric vehicles enjoy. The cost of maintaining them is low compared with petrol and diesel models.

Aside from being supported by government incentives in many countries, electric vehicles and hybrids are usually exempt from urban congestion charges. Diesel and petrol vehicles are not, and some governments and city authorities are increasingly discriminating against diesels on environmental grounds.

Diesel – still a fleet contender

I doubt this will discourage fleets from running diesels any time soon, however. In France, for example, we still have a tax environment that favours diesels. Admittedly the government will probably start taxing diesel more than petrol soon but the difference will be no more than a couple of cents a litre.

It won’t eliminate one of the big advantages of diesel from a fleet operator’s viewpoint. You can reclaim 80% of the VAT you pay on diesel in France but you cannot reclaim any of the VAT on petrol.

Tougher future urban bans on diesel cars will probably only affect pre-Euro 6 models. Fleets tend to run relatively new vehicles so the impact on them will be limited.

So where does this leave cars powered by the newer and more-efficient crop of petrol engines that are becoming available?

The case in their favour is very strong, especially in markets where taxation policy isn’t quite as important in determining peoples’ choices. I think demand will grow – but the speed of growth will vary immensely from country to country.

Fleet operators – and businesses such as ALD – think long term

The long cycles we operate on means there is no immediate yo-yo effect on the type of vehicles we supply. And who knows where the price of a barrel oil will be in 2018/19?

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