Why are UK fuel prices rising again?

Introduction

UK fuel prices are rising once again as global crude oil prices jump following the collapse of peace talks aimed at ending the US-Israel war with Iran. Average UK pump prices have moved up to 152.54p a litre for petrol and 167p a litre for diesel. This upward trajectory follows a swift rebound in international benchmark prices, with Brent crude oil climbing back to around $87 a barrel after dropping to near $70 a barrel in early July.

Motorists across the United Kingdom are being cautioned that fuel costs are likely to increase further in the coming weeks. Simon Williams, head of policy at the RAC, stated that price increases are likely to keep coming thick and fast. Because wholesale crude price changes take approximately a fortnight to be reflected at local petrol stations due to slow oil transport times, the recent surge in global market costs has not yet fully fed through to retail pumps.

This renewed pressure on fuel prices highlights the vulnerability of the UK domestic market to international geopolitical disruptions. As global energy supplies face ongoing uncertainty, drivers and businesses are monitoring forecourts closely for further price movements.

Background

Global crude oil prices directly determine UK fuel costs because the country relies heavily on energy imports. The majority of the oil consumed in the UK is imported primarily from the United States and Norway, while most North Sea oil produced locally is exported elsewhere for refining. As a consequence, any volatility in global oil markets quickly affects prices paid by UK consumers at the pump.

On 28 February, the US-Israel war with Iran began, severely disrupting global energy production. The conflict effectively closed the Strait of Hormuz, a critical maritime transport route responsible for carrying roughly 20 percent of global oil and liquefied natural gas. The closure of this key passage caused immediate turmoil across international commodity markets.

Prior to the outbreak of the war, Brent crude oil traded around $70 a barrel. Following the start of hostilities, benchmark prices surged rapidly, eventually peaking above $120 a barrel during the height of the conflict.

The rapid rise in crude oil costs spilled over directly to UK forecourts. Diesel reached its conflict peak of 191.54p a litre on 15 April, while petrol climbed to its conflict peak of 159.53p a litre on 28 May. In response to the growing financial pressure on drivers, UK Prime Minister Sir Keir Starmer took action on 20 May by announcing the postponement of a planned 5p fuel duty increase. The tax increase, originally scheduled to take effect in September, was delayed until 31 December.

Despite the severe cost increases experienced during the conflict, fuel prices have remained below the record high levels reached in summer 2022 following Russia's invasion of Ukraine. During that peak, petrol reached 191.5p a litre and diesel hit 199p a litre.

Latest Developments

The market trajectory shifted significantly in June when the United States and Iran agreed to a framework deal to end the fighting. The diplomatic breakthrough caused global oil prices to nosedive, providing rapid relief to international energy markets and UK drivers.

By early July, Brent crude fell back near $70 a barrel. Fuel prices at UK pumps dropped to a low of 150.50p a litre for petrol and 164.52p a litre for diesel. Luke Bosdet, head of policy at the AA, stated that the organization was surprised by how fast prices fell in July, attributing the rapid decrease to the government's Fuel Finder scheme. The scheme enables drivers to compare petrol station costs in their local area, driving competitive pricing among retailers.

However, the relief proved temporary as peace talks to end the US-Israel war with Iran subsequently collapsed. The breakdown of negotiations sent Brent crude prices climbing back to around $87 a barrel, driving average UK prices up to the current figures of 152.54p a litre for petrol and 167p a litre for diesel.

Throughout the volatility caused by the war, questions were raised regarding forecourt pricing strategies. However, an investigation by the official markets regulator found no evidence that fuel retailers actively altered pricing strategies to engage in price gouging during the crisis.

Industry analysts emphasize that because wholesale price changes require roughly two weeks to reflect at the pump due to transport delays, recent increases in crude oil prices will continue to impact retail rates over the near term.

Key Facts

• Every $10 (£7.53) increase in global crude oil prices adds approximately 7p a litre to UK pump prices.

• Global crude oil prices for Brent crude have climbed back to around $87 a barrel after falling near $70 in early July.

• Current average UK fuel prices stand at 152.54p a litre for petrol and 167p a litre for diesel.

• During the recent conflict, diesel hit a peak of 191.54p a litre on 15 April, while petrol peaked at 159.53p a litre on 28 May.

• Historical record high fuel prices were set in summer 2022 following Russia's invasion of Ukraine, when petrol reached 191.5p a litre and diesel reached 199p a litre.

• The Strait of Hormuz is a critical shipping route that carries roughly 20 percent of global oil and liquefied natural gas.

• Prime Minister Sir Keir Starmer postponed a planned 5p fuel duty increase from September to 31 December to ease cost pressures.

• The official markets regulator cleared fuel retailers of active price gouging during the energy crisis.

• Drivers can check and compare petrol station costs across the UK using the government's Fuel Finder scheme.

Conclusion

The resurgence in global oil prices underscores the lingering economic impacts of the conflict and the fragile nature of energy market recoveries. Experts warn that returning shipping in the Strait of Hormuz to normal levels will take time, creating transport bottlenecks that could impact the global economy for potentially months to come.

For UK consumers, the immediate concern remains at the pump. With wholesale Brent crude costs rising once again, the RAC expects fuel prices to maintain their upward trend. Because global crude price shifts take about a fortnight to filter down to forecourts, driver costs are expected to climb further as current wholesale rates translate into retail price tags.

While the government's Fuel Finder scheme helped accelerate price cuts in July, and Prime Minister Sir Keir Starmer's postponement of the 5p fuel duty increase until 31 December provides temporary tax stability, global geopolitical factors continue to dictate domestic energy expenses. As long as diplomatic efforts remain stalled and maritime transport routes work to clear delays, UK households and businesses will remain vulnerable to shifting global oil markets.