The effects on the UK economy of a sustained $10 rise in oil prices would depend on the factors driving oil prices—for example, the extent to which prices increased due to demand pressures or supply constraints.
The Chancellor of the Exchequer announced in the Budget that, because of continuing oil market volatility, the annual inflation-only increase in main fuel duties would be deferred until 1 September 2006.
Oil has been trading in recent weeks in a range of $66-$78 per barrel. The risk of oil price volatility remains high, and the Government will not therefore go ahead with the planned inflation-only increase in main road fuel duties on 1 September—and related increases for rebated oils, biofuels and road fuel gases—and will review the position again at the time of the pre-Budget report.