What is happening to UK fuel and petrol prices?

Fuel prices for petrol and diesel in the UK have climbed recently, largely due to the ongoing conflict involving the US, Israel, and Iran. Since the fighting began on 28 February, wholesale oil and gas prices surged amid disruptions to energy production and transportation in the Middle East caused by missile strikes and drone attacks. Although a temporary ceasefire declared by the US president on 7 April brought some relief with wholesale oil and gas prices easing, these prices remain significantly elevated compared to levels before the conflict erupted.

The cost of crude oil heavily influences the price motorists pay at the pump because it is a primary ingredient in petrol and diesel. Analysts estimate that a $10 increase in oil prices results in roughly a 7p rise per litre at fuel stations. The war triggered sharp fluctuations in Brent crude oil prices, the international benchmark, with prices spiking from around $73 to over $110 per barrel. This has led to an additional £13 or more to fill a family car with petrol and approximately £26 more for a tank of diesel. Recent data show an average petrol price of 157.71p per litre and diesel at 190.62p per litre, which is higher than the day before but still below the peaks seen in summer 2022 following Russia’s invasion of Ukraine.

Looking forward, the key concern for wholesale oil markets remains the status of the Strait of Hormuz, a crucial chokepoint through which about 20% of the world’s oil and liquefied natural gas transit. This waterway has effectively been closed since the onset of hostilities but is set to reopen temporarily under the ceasefire agreement. Iran aims to maintain permanent control of the Strait, a position strongly opposed by the US. Uncertainties persist over the specifics of the ceasefire, including reports of possible transit fees for tankers, meaning oil prices are likely to stay above pre-conflict levels. Additionally, damage to oil and gas infrastructure across the Gulf continues to hinder refining capacity. Consequently, the RAC has advised that fuel prices are unlikely to drop in the near term, though the rate of increase might slow.

The UK relies heavily on imported oil and gas, primarily from the US and Norway, with domestic North Sea production largely exported for refining abroad. Concerns about a potential fuel shortage emerged in March after Shell’s chief warned of possible supply issues in Europe due to the Strait’s closure. The International Energy Agency recommended measures to reduce energy consumption in response, including encouraging home working and carpooling. Despite these challenges, the UK government and industry bodies have reassured the public that fuel supplies are resilient. Household energy bills remain protected for now due to price caps and fixed tariffs, but there is potential for increases once the next price cap review occurs in July. Heating oil users, particularly in Northern Ireland and rural areas, have experienced rises linked more directly to global oil price changes, prompting the government to introduce a £53 million support package. Meanwhile, the Bank of England faces uncertainties in its inflation outlook and interest rate decisions, with recent developments casting doubt on previously expected rate cuts, and mortgage lenders have already started raising lending rates following the conflict’s outbreak

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