Petrol retailers were warned by a Cabinet minister on Thursday not to rip off motorists as the price at the pumps soared above £100-a-tank.
Levelling-Up Secretary Michael Gove said an “eagle eye” would be kept on garages to ensure they are not making “excess profits” with the sky-high cost of petrol and diesel.
However, a petrol retail boss hit back, accusing the Treasury of now raking in more money from motorists than before Chancellor Rishi Sunak’s 5p a litre cut in fuel duty in March.
The row erupted just hours before the average cost of filling a typical family car with petrol spiralled above £100 for the first time.
Figures from data firm Experian Catalist show the average price of a litre of petrol at UK forecourts reached a record 182.3p on Wednesday.
That was an increase of 1.6p compared with Tuesday, taking the average cost of filling a 55-litre family car to £100.27.
The average price of a litre of diesel on Wednesday was 188.1p, having recently gone over £100-a-tank .
Some forecourts are already selling petrol and diesel above £2 per litre.
RAC fuel spokesman Simon Williams said the average price of petrol soaring through the “thoroughly depressing threshold of £100 a tank” meant it was “a truly dark day” for drivers.
He added: “There’s almost certainly going to be upward inflationary pressure, which is bad news for everybody.
“While fuel prices have been setting new records on a daily basis, households up and down the country may never have expected to see the cost of filling an average-sized family car reach three figures.”
He stressed that many people will be hoping for further financial support from the Government as the 5p per litre cut in fuel duty “looks paltry” because wholesale petrol costs have increased by five times that amount since it was implemented in the spring.
“A further duty cut or a temporary reduction in VAT would go a long way towards helping drivers, especially those on lower incomes who have no choice other than to drive,” he said.
Mr Gove admitted that many households were facing difficult times due to the cost-of-living crisis, including the soaring cost of fuel.
He told Sky News: “One of the things we do need to do is to make sure that every forecourt, every outlet, is making sure that it doesn’t take advantage of this situation to build up excess profits.
“I think we do need to keep a watch on this and I know that the Competition and Markets Authority and others will always keep an eagle eye in order to make sure we don’t have a situation where companies are taking unfair advantage of consumers.”
However, Alasdair Locke, chairman of the Motor Fuel Group, the UK’s largest independent forecourt operator, denied garages were ripping off motorists, insisting that their margins had also been hit by the soaring cost of petrol and diesel following Vladimir Putin’s invasion of Ukraine and the imposition of western sanctions on Russia.
“It would be easy if there was evidence that we were just profiteering but there is no evidence of that, in fact rather the opposite, that our margins are under pressure along with everybody else’s,” he told BBC Radio 4’s Today programme.
He added: “If you look at the tax take on fuel.
“In mid-February, before the Chancellor reduced his duty the Government was getting about 83p a litre, which was a combination of VAT and duty.
“Two days ago, on the average price at the pump, the Government was earning 84p.
“Duty had gone down but the VAT had gone up because the price of fuel had gone up and VAT is charged on the wholesale price of fuel.”
Hannah Essex, co-executive director of the British Chambers of Commerce, said it was speaking to the Treasury about cutting VAT on businesses.
It expects economic growth in Britain to “grind to a halt” this year before falling briefly into negative territory.
Ms Essex: “Businesses are facing this huge pressure around costs, so energy prices, shipping costs, raw materials, there is a lot of presure on wages at the moment because of the challenges that households are facing around the cost-of-living.
“So all of this is putting huge pressure on businesses, forcing them to make really tough decisions about either passing costs on to their customers, or making changes or making cuts to their business, and in some cases deciding to shut up shop because their margins are being wiped out by this increase in cost.
“Looking ahead, we are expecting investment to stall...businesses are holding onto any cash that they have.”
Mr Gove stressed that Chancellor Rishi Sunak is keeping “under review all the measures” to tackle the rising cost of energy bills and fuel.
He added: “The situation is difficult for many people and of course it’s all a consequence of the war in Ukraine, and we don’t know how the shockwaves of that war will continue to affect the energy market and the price of petrol for people who are hard-pressed.
“We have taken action to try to deal with the situation - the Chancellor has reduced fuel duty - and of course we keep under review all the measures necessary in order to help people with the cost of living.”
The BCC said global events continue to weigh heavily on the economy, as it downgraded its expectations for growth for 2022 to 3.5 per cent, from a previous 3.6 per cent.
The BCC said it now expects inflation to reach ten per cent in the final quarter, “comfortably outpacing” average earnings growth.
Business investment is set to be hit, with 1.8 per cent growth predicted this year, down from 3.5 per cent in the previous forecast, said its report.
The gloomy outlook came just 24 hours after the Organisation for Economic Co-operation and Development forecast the UK economy to grow by 3.6 per cent this year, down from an earlier prediction of 4.75 per cent, and that this would be followed by zero growth next year.
It said global growth is slowing due to the war in Ukraine.
But the UK is set to go, according to the OECD experts, from the second-fastest growing economy in the G7 group of industrial nations (Britain, the US, Canada, Germany, Japan, France and Italy) to the slowest growing in 2023.
Jonathan Reynolds, shadow business secretary, said: “The Conservatives’ failure to grow our economy is hampering British business with planned business investment reportedly down by half.”
“Labour would grow our economy with our plan to buy, make, and sell more in Britain, our climate investment pledge, and tax cuts for small businesses now to get our economy firing on all cylinders.”
A Treasury spokesperson said: “The UK had the fastest growth in the G7 last year, and our unemployment rate is the lowest it’s been in nearly 50 years - but we understand that people are struggling with rising prices.
“While we can’t insulate the UK from global pressures entirely, we have a plan for growth, and are supporting people with the cost of living.
“Eight million of the most vulnerable families will receive at least £1,200 of direct payments this year, with all families receiving £400. We’re also investing in capital, people and ideas to boost growth and living standards in the years to come.”
