UK petrol and diesel prices: More new highs as oil prices rise

The average pump price for diesel in the UK has now broken through the 155 pence per liter barrier, and petrol has also risen.

Diesel now costs an average of 155.23 pence per liter at UK pumps, with petrol at 151.67 pence per litre, according to the latest figures from RAC Fuel Watch. In addition, further increases in fuel prices could occur.

RAC fuel spokesman Simon Williams explained: The sudden $10 jump in oil prices on Tuesday [1 March] at $113 a barrel is likely to push the average price of petrol to 155 pence a liter and diesel to 160 pence, especially since this price is not simply a market error caused by the United States. States and their allies who decide to tap into the strategic oil reserve. If Oil stays at this level, the trip to an average unleaded price of 155p could be far too fast.

Why is the conflict in Ukraine affecting fuel prices?

Russia is one of the world’s largest producers of oil and gas, so any disruption to its production processes has a global impact.

With Russia having launched a full-scale invasion of Ukraine and facing international sanctions, there is potential for significant supply disruption. Russia produces 4.5 million barrels of oil every day, and only Saudi Arabia produces more.

Sanctions imposed on Russia so far have targeted banks and oligarchs rather than the country’s energy sector, but factors such as Germany’s postponement of the Nord Stream 2 gas pipeline will have an effect on the oil market. energy as a whole. Russia also has the ability to cut oil exports to Europe in a tit-for-tat response to economic sanctions, and experts suggest Saudi oil fields may struggle to ramp up production enough to counter such measures.

Opec, the cartel of oil producers, is already struggling to meet its production targets as demand for crude rebounds following the easing of lockdown restrictions. This has pushed prices higher, with analysts warning that the ability to increase supplies is limited if flows from Russia are affected by sanctions, the Financial Times newspaper reported.

What makes up the price of fuel in the UK?

The price of fuel can be divided into three sections; government-imposed taxes, drilling, refining and transportation costs, and oil company profit margins.

For petrol, diesel and bioethanols, the government obtains about 65% of the overall cost through fuel tax and value added tax (VAT). The fuel tax represents the fixed price of fuel that remains the same regardless of the fluctuation in overall oil prices. Currently the Treasury adds 57.95 pence to each liter of fuel via Fuel Tax and a further 20% via VAT. The amount you pay in VAT depends on the amount of fuel you buy.

The second biggest chunk comes from the wholesale costs of the fuel itself. The wholesale cost is a combination of exchange rates, world oil prices, and even domestic supply and demand.

Finally, the smallest part of what motorists have to pay for fuel comes from the service stations themselves. A typical petrol station profits around 2 to 5 pence per litre, but fierce competition can drive that figure even lower. Supermarkets are increasingly using fuel prices as a loss leader to attract customers.

Why is supermarket fuel cheaper than an independent forecourt?

Supermarket forecourts usually offer the cheapest fuel prices and this is due to the market power that supermarkets hold. Companies like Asda, Tesco, Sainsburys and Morrisons are all in competition with each other, so they are keeping fuel prices as low as possible in the hope that when motorists come to fill up they could also do their weekly shopping.

There are persistent rumors that supermarket fuel has fewer additives and is of lower quality than traditional forecourt fuel, but there is little hard evidence of this. All fuel sold in the UK must meet the standards set out in the Motor Fuel Regulation.

Why is fuel so expensive on the highways?

Motorway service stations argue that the reason their prices are higher is that many of them are open 24 hours a day and offer more service than a regular forecourt. Highway service stations also pay high rents for the buildings they operate.

In more remote areas, fuel is often more expensive due to higher transport and supply costs, but according to RAC fuel spokesman Simon Williams, this does not apply to motorway stations. : We see no reason why highway fuel should be so much more expensive. In fact, it’s arguably much easier from a delivery perspective than getting fuel to city gas stations.

Why is diesel more expensive than gasoline?

Although diesel and petrol are taxed the same by the Treasury, historically diesel has been more expensive than petrol as domestic refineries have struggled to keep up with demand. This forced the UK to import diesel from other countries at a higher rate than petrol. Additionally, diesel prices are pushed up by the cost of additives that go into the fuel.

In addition, the gap between petrol and diesel prices in the UK widens during the winter. The end of the driving season in the United States means that retailers have a surplus of gasoline that they cannot export, so they sell it here at a lower price. Diesel demand, meanwhile, is growing across continental Europe, where the fuel is commonly used in fuel oil.

However, the influx of cheap diesel from countries like Saudi Arabia has turned the tide, bringing wholesale diesel prices closer to those of gasoline and driving down the price at the pump.

What is your opinion on fuel prices in the UK? Are we paying too much for our gasoline and diesel? What would you do about it? Join the debate in our comments section below…