The surge in petrol and diesel prices in the United Kingdom has captured headlines and motorists’ attention as both have crossed the significant 150p per litre mark for the first time since early 2023, based on data from RAC Fuel Watch.
Understanding the Cost of UK Petrol in 2023
The wallets of UK drivers are feeling the strain as petrol and diesel prices have surged for four consecutive months. This relentless increase in fuel costs can be attributed to the persistent elevation of global oil prices, which remain around $90 per barrel. For drivers and businesses alike, fuel prices are a critical aspect of daily life, impacting everything from travel plans to the price of goods and services. To navigate this ever-changing landscape, it’s essential to comprehend the factors driving these fluctuations and how they could influence your pocket. In this article, we’ll delve into the reasons behind this fuel price escalation, its implications, and how motorists can adapt to the evolving landscape.
As mentioned, one of the most significant determinants of petrol prices in the UK is global oil prices. These prices can be influenced by a myriad of factors, including international conflicts, supply and demand, and geopolitical instability. The uncertainty in global oil markets often leads to price volatility. Additional factors include the strength of the pound against the dollar. Since oil is traded in dollars, a weaker pound can drive up fuel costs in the UK. Other affecting factors include fuel duty and Value Added Tax (VAT). Policy adjustments related to these tax components can substantially influence petrol and diesel prices. Local factors can also influence petrol prices. Increased demand or local supply disruptions, for example, due to adverse weather conditions, can lead to temporary price spikes.
According to the RAC fuel watch, the rising prices at the pumps are due to the Organisation of the Petroleum Exporting Countries (OPEC) reducing supply. The weaker value of sterling is also impacting costs. The cost of crude oil has increased per barrel. As a result, the wholesale fuel costs, the prices that retailers themselves pay, have risen. This increase has subsequently been reflected in higher prices for drivers at the pump. If the price were to exceed $100, it would mark the first time since August 2022.
Simon Williams, RAC fuel spokesman, shared insights on this ongoing issue, saying, “While four months of rising petrol prices came to an end in October, it’s definitely no cause for celebration that the drop was only 2p a litre as our data shows it should have been far greater. Instead, drivers will be outraged to learn they are still not being charged a fair price at the pumps by the big four supermarkets that dominate UK fuel retailing.
“This is dramatically demonstrated by the fact that one small independent retailer in rural Shropshire is selling petrol for 11p cheaper than the supermarkets.”
“The fact that drivers appear to have lost out to the tune of nearly £1 billion as a result of increased retailer margins on fuel is nothing short of astounding in a cost of living crisis and confirms what we’ve been saying for many years: that supermarkets haven’t been treating drivers fairly at the pumps. It’s all about action now, and we very much hope the government follows through with both of the CMA’s recommendations. While forcing retailers to publish pump prices is a positive step for drivers, what’s of far more significance is the creation of a fuel-monitor function within the government which, we very much hope, actively monitors wholesale prices to ensure forecourts don’t overcharge when the cost they pay to buy fuel drops”.
“It’s worrying that retailer margin across the UK is higher for petrol than it should be, considering the big four supermarkets were told off by the Competition and Markets Authority for overcharging drivers by £900 million in 2022,” the RAC said. Nonetheless, fuel retailers have responded to the RAC’s allegations by asserting that their pricing strategies are not exploitative and are predominantly influenced by a variety of factors.
“Contrary to claims made by the RAC, our members are not unjustifiably pricing petrol higher than needed. Fuel margins have been under pressure due to increased operational costs that our members have had to bear,” said Gordon Balmer, executive director of the Petrol Retailers Association (PRA).
In July 2023, a comprehensive report released by the Competition and Markets Authority (CMA) revealed that, on average, drivers paid an extra 6 pence per litre for fuel in the previous year. This increase was attributed to supermarkets capitalising on decreased competition, resulting in higher pump prices. CMA’s Chief, Sarah Cardell, emphasised that supermarkets typically offered the most competitive fuel prices and played a crucial role in setting market standards. However, the price hikes would have had a more significant effect on vulnerable individuals, particularly those living in areas with limited choices of fuel stations.
European gas prices have also been affected seeing the prices surged by nearly twenty percent, driven by the looming threat of a strike by Australian workers should pay negotiations fail to yield an agreement.
While petrol prices remain dynamic, there are steps you can take to optimise fuel efficiency and minimise the impact of price fluctuations.
- Vehicle Maintenance: Regular vehicle maintenance, including proper tire inflation, engine tune-ups, and clean air filters, can enhance fuel efficiency.
- Eco-Driving: Adopt eco-driving practices, such as smooth acceleration and deceleration, to reduce fuel consumption.
- Public Transport: Utilise public transportation or carpooling for some journeys to reduce the overall petrol consumption. Another option is to see if your workplace offers a walk/cycle to work scheme as part of the government’s ambition to make cycling and walking the natural choices for shorter journeys, or as part of a longer journey by 2040.
- Alternative Fuels: Consider alternative fuels or electric vehicles to potentially save on fuel costs in the long run.
- Shop Smart: Try to shop around and research the best prices in your area. Always keep an eye out for promotions, loyalty cards, and supermarket offers that can provide petrol discounts.
As the year unfolds, the cost of petrol in the UK will continue to evolve in response to numerous factors. Understanding these dynamics and staying updated on market trends and government policies will enable you to make informed decisions and manage your fuel expenses effectively. While it might not be possible to control the external forces impacting fuel prices, your approach to vehicle use and fuel efficiency can help mitigate their impact on your wallet, especially through this cost of living crisis. If you have any further suggestions on how to save in the current climate or any viewpoints you wish to share feel free to share via our social media platforms, we welcome all comments!