Islands oil discount 'profiteering' claim

Motorists on Shetland are among those supposed to benefit from the discount

The Treasury has warned oil suppliers against attempting to profiteer from a discount scheme for island motorists.

From Thursday, the UK government is cutting the duty on diesel and petrol on islands by 5p per litre.

But in the past week, rises in the cost of fuel supplied to Orkney, Shetland and the Western Isles put up prices by more than the proposed discount.

Distributor Scottish Fuels said the increase reflected the rising worldwide price of fuel.

The Lib Dem MP for Orkney and Shetland, Alistair Carmichael, claimed there had been no corresponding increase on the mainland over the same period.

The UK government scheme will cut fuel duty in the Inner and Outer Hebrides, Northern Isles, islands in the Clyde and the Isles of Scilly.

About 90 fuel retailers on the islands have applied to take part in the pilot scheme, which will see them receive a 5p a litre rebate on the petrol and diesel they purchase.

The government stated they would be required to pass on the full saving to the customer.

Petrol and diesel at island pumps can be 20p more expensive than mainland prices.

Sam Chambers, a director of Scottish Fuels, strongly denied any suggestion the company had been seeking to boost profits ahead of the discount scheme being introduced.

He told BBC Radio's Good Morning Scotland programme: "How can you profiteer if you are making 2.6p per litre?

"The margin we make is to cover our transport costs, we have drivers to pay. The public perception and reality are not exactly the same.

"We are quite prepared for our company's figures to be scrutinised by anyone independently as to what we actually charge. We do not set the retail price on the islands - they are set by the retailers.

"We import it and we sell it, and we do it, we think, to the best of our ability."

Mr Chambers said the company's profit margins had not increased since it acquired the business from BP in 2007.

He added: "The main people who make money out of fuel are Her Majesty's government. There is 20% VAT and there's 57.9p duty on it."

Mr Carmichael told the same programme it would be a "very strange coincidence" for prices to have increased by 5p in the week leading up to the discount being introduced.

'Dramatic spike'

He said: "The evidence that I got passed to me by a journalist in Shetland last night was that a local garage there had the price they were required to pay put up 2p per litre this week and 3p per litre last week.

"Now if you look at the way that fuel prices move over the country as a whole, taking the figures that I took from the AA website this morning, you've seen price increases of 1.3p per month in January and February of this year.

"I think the question that has to be answered, and that I am determined will be answered, is why do you see a dramatic spike of this sort in the isles that does not seem to be reflected in the rest of the country?"

Angus MacNeil, the Nationalist MP for the Western Isles, said the price differential between fuel on the islands and in Inverness was currently about 10p.

He said he would expect this differential to decrease to 5p after the discount scheme was introduced if it was working as it should.

Welcoming the offer by Scottish Fuels to have their figures independently scrutinised, Mr MacNeil added: "When I have retailers phoning me that they are concerned they their price of fuel is going up just before, certainly you've got to be aware of the danger of profiteering.

"We have to realise this scheme is on probation - it is a pilot scheme. Any government that feels this isn't being passed on to the consumer will end the scheme.

"All over the Uists, all over Lewis and Harris, there is an exceptional premium on fuel and people are facing quite a battle week-in week-out with the amount of money they're putting in the tank to go to work and this scheme really requires trust and good faith."

Mr MacNeil said the Office of Fair Trading is due to report in the summer on the monopoly in supplying fuel to the islands.

But he added: "I would also caution that we don't say there is profiteering too early, before we're absolutely certain of it, because even the fact of people raising concerns and rumour, as we've seen in other schemes in the islands, can be detrimental."

Chief Secretary to the Treasury Danny Alexander is expected to be in Scotland for the launch of the discount scheme.

Speaking ahead of his visit to Skye, Mr Alexander said: "It's terrific that islanders in Scotland and the Isles of Scilly will finally begin to see a cut in fuel prices after years facing higher costs.

"This will make a real difference to people who face the highest fuel costs in the country.

Western Isles Council - Comhairle nan Eilean Siar - has described the rises as "astonishing and disappointing".