Fair Fuel Stabiliser - What Is It Exactly?

So, what is this new fuel pricing regime the government has come up with? Well here it is in a nutshell...

Under a Fair Fuel Stabiliser, when fuel prices go up, fuel duty would fall. And when fuel prices go down, fuel duty would rise.

This is a new way of setting fuel duty that will strengthen environmental signals when oil prices fall, and cushion the blow when fuel costs rise. Government will be sharing the pain when prices rise and sharing the gain when they fall.

If, for example, a Fair Fuel Stabiliser had been introduced at the 2008 Budget:

 Fuel would be 5p per litre cheaper.

 This would save up to £3.50 on each tank of fuel for a Ford Mondeo, or £2.60 for a Vauxhall Astra.

 If, instead of rising, oil prices had fallen below the $84 forecast in the Budget, then fuel duty would have risen. In either case forecast government revenues would have been unchanged.

If a Fair Fuel Stabiliser had been in operation over the last year:

 The average household would have saved more than £90 in fuel costs.

 Instead of being 3.3%, official CPI inflation would now be below 3%.

The Proposal

Under a Fair Fuel Stabiliser, when fuel prices go up, fuel duty would fall. And when fuel prices go down, fuel duty would rise. Government would save in the good times in order to help in the bad times. It’s a classic example of fixing the roof when the sun is shining.

The Fair Fuel Stabiliser would bring three key benefits as outlined in the Conservatives manifesto:

"1. It would increase the stability of family finances. Government would be helping when the cost of living was rising sharply, by setting aside money in good times to help in difficult times.

2. It would enhance economic stability by reducing the sensitivity of the public finances and inflation to unpredictable changes in oil prices.

3. It would provide greater certainty about the price of carbon, consistent with the principles outlined in the Stern Review."

So what do you think fo the proposed Fair Fuel Stabiliser?