9.5.18 Vehicle Operating Costs (Fuel)

Fuel consumption is estimated using a function of the form:

L = a +bv + cv² + dv³

Where:
L = consumption, expressed in litres per kilometre;
v = average speed in kilometres per hour; and
a, b, c, d are parameters defined for each vehicle category.

The parameters needed to calculate the fuel consumption element of VOCs are presented in Table 9.16.

Table 9.16: Fuel VOC Formulae Parameter Values (litres per km, 2002)

Table 9.17 converts the VOC parameters into pence per kilometre values (multiplying the parameter values by the resource cost). 

Table 9.17: Fuel VOC Formulae Parameter values (pence per km, 2002)

Table 9.18: Fuel Costs, Duty and VAT rates (2002 prices)

The resource cost of fuel VOCs is net of indirect taxation. The market price is gross of indirect taxation and is therefore the sum of the resource cost and fuel duty, plus VAT of 17.5% (market price = [resource cost + fuel duty] x 1.175). In work time the perceived cost of fuel VOCs is the cost perceived by businesses. Businesses are generally viewed as perceiving costs in the factor cost unit of account as most business costs are free of indirect taxation because they can claim it back. However, businesses cannot reclaim fuel duty and therefore the perceived value of fuel VOCs in work time is equal to the resource cost plus fuel duty. In non-work time, the perceived cost of fuel VOCs is the cost as perceived by the individual consumer. Consumers perceive costs in the market prices unit of account and therefore the perceived value of fuel VOCs in non-working time is equal to the market price.

Table 9.19 shows the forecast proportion of the car fleet using petrol or diesel used to calculate average car values.

Table 9.19: Proportion of car fleet using petrol or diesel

Fuel duty is assumed to remain constant in real terms beyond the increases announced in the 2007 Budget that are reflected in Table 9.18.

Information on the rates of fuel duty to be applied in the calculation of rail fuel operating costs can be found in Section 9.5.22 Rail Operating Costs.