The government has recently amended fuel regulations which affects all fuel suppliers and fuel users across the country. These amendments mostly impact the pricing mechanism of fuel due to certain legal obligations that now have to be met.
The three main obligations affecting both fuel suppliers and fuel users are the Renewable Transport Fuel Obligation (RTFO), the Development Fuel Obligation (DFO) and the Green House Gas Obligation (GHG).
RTFO – Renewable Transport Fuel Obligation
The RTFO was introduced to increase the percentage of renewable fuels which make up total fuel consumed. Biofuel targets have been set to gradually increase FAME content in fuel to 12.4% by 2032.
Prior to 1st January 2020, the percentage of renewable fuels was set at 8.4% but from 1st January 2020 this increased to 9.75%. This increase in the percentage of renewable fuels due to the legislative change has resulted in an increase to the cost of diesel of 0.44 pence per litre. (1)
Development Fuel Obligation
From January 1st 2020, the government has amended the Development Fuel Obligation. The change has set out an increase in the proportion of development fuels to 0.15% of total blend.
At the time of writing, our experience tells us that no commercially viable development fuels are readily available and therefore our suppliers have opted to pay the buyout fee to the government. This equates to an increase of 0.04 pence per litre. (2)
GHG – Greenhouse Gas Obligation
Last year, the Department of Transport introduced new regulations to reduce carbon emissions in the transport fuel sector. The obligation to decrease Greenhouse Gas emissions applies from 1st January 2020 until 31st December 2020. All fuel suppliers are required to achieve a 6% reduction in Greenhouse Gas emissions in 2020. This will lead to an expected increase of 0.35 pence per litre (3) to comply with the new obligation.
To simplify and to summarise, all fuel distributors have had to incorporate these additional costs from 1st January 2020:
The changes to legislation and the introduction of new legal obligations will incur additional costs on each part of the legislation. Prices issued before 1st January 2020 with dates of 2019, do not include the additional costs of the increased RTFO, Development Fuels, and Greenhouse Gas obligations. Orders placed in 2019, with a delivery date in 2020, will include additional costs in compliance with these legal obligations.