James O'Neill's Blog

May 29, 2008

Off topic. The Cost of fuel, market forces and being green

Filed under: General musings,Mobility,Working at Microsoft — jamesone111 @ 2:39 pm

Part of my salary package working at Microsoft UK is a company car, for which Microsoft buys the fuel. I can opt out of this scheme and take money instead (which is taxed like any other Salary payment) and the Tax office also works out the notional value of the car and fuel (both are based on the C02 emissions of the car)- the critical thing is that this doesn’t change with the amount of fuel I use, or the price of fuel. In effect the cost of fuel to me is fixed however many miles I do; which gives me a financial incentive to use the car rather than greener forms of transport. It also takes away any financial incentive I have to work from home and when I do it is based on productivity and work/life balance (if anything is going to hinder my getting the job done, better that it’s my son asking what I’m doing on the computer than the hubbub in our hotdesk pens)

Last night on the way home I stood idly calculating the price of fuel per (imperial) Gallon, we’ve been buying fuel in litres in the Britain for 20 years now but we still think of fuel consumption in miles per gallon, like my grandmother converting prices into Shillings to the day she died (10 years after currency went decimal) we still go back to pricing in Gallons. The little display on the pump last night said 132.9 pence per litre; as the displays ticked round to  64 litres and £85, I tried to multiply 132.9 by 4.54 to get price per Gallon. "Call it 4/3 x 4.5 … thats £6 a gallon !"… " now without the rounding is that just over or just under ?" Queuing to pay I got my phone out and used the calculator £6.03. For readers in the US, your gallons (and pints) are 20% smaller than ours,and with the pound at $1.97 that makes UK diesel abut $9.50 per US Gallon (Petrol/Gasoline is about 10% cheaper)

For the at least the last 10 years, governments have been raising the cost of fuel above the rate of inflation to try to encourage us to use less of it. (I don’t want to get into party politics here, I think the Conservatives started it and Labour thought it was a good idea and continued the policy). There are now differential rates of Vehicle Excise Duty on based on emissions. Those who think of their fuel in gallons remember when this flat rate tax was called the "Road-Fund licence" but for years governments have been using fuel and VED as a way of raising money to pay for anything but roads. I’ve heard politicians from all the main parties arguing for huge rates of VED for the most polluting cars. Since I have a "clean-diesel" which does about 50 Miles to the Gallon it doesn’t affect me, and in any event as a company car driver I’m insulated from rates of VED, so I have no particular interest to turn me against such a plan. But  like calling for extra taxes on "The rich", it’s easy politically: if you hit people at one extreme you don’t hit the other 95% of people who might vote for you. It doesn’t take a mathematical genius to see that someone whose car only does 20 Miles per gallon but only drives 40 Miles a week, uses less fuel than someone whose car does 50 to the Gallon but drives 400. Should they pay tax on fuel used or on their vehicle’s potential to pollute ? Increasing the cost of owning an inefficient car might result in some of them being scrapped early – which takes money out of the economy, and results in more demand to manufacture new cars – a process which also uses a lot of energy.  Logic would say scrap VED entirely and raise the same amount of tax from extra fuel duty. Those who use less fuel than average would be better off, those who use more would be worse off. The whole government bureaucracy dealing with VED could be scrapped (saving more money) and the VED tax disk could be replaced with something issued the car’s insurers to show it’s paperwork was all in order.  The political problem with such a policy is that everybody sees their fuel price go up and has to pay more every week, reminding them the government has done something unpleasant.

The key, of course, is to find ways to make fewer journeys. and to use more efficient forms of transport for the ones we do make. As someone wrote
"Here in my Car,
I feel Safest of all,
I can lock all  my doors,
it’s the only way to live,
In cars"

Of course he it might not have scanned so well to say "I can pick my nose" , "I can shout at the radio" , "I can listen to music without headphones" , "I can set the temperature to what I want" etc. Some of us might be priced out of our cars and into using car-shares or public transport. But if we didn’t all go to the office every day, the office could be smaller and the saved Journeys would save money, time and pollution. Think of that next time you curse the traffic or the cost of filling up.

This post originally appeared on my technet blog.

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