Record Monthly Rise in Petrol and Diesel Prices, Says RAC

The Royal Automobile Club (RAC) has reported that fuel prices in the UK experienced their sharpest monthly surge since records began, driven by heightened global energy costs linked to the US-Israel conflict with Iran. The organisation highlighted that both petrol and diesel prices have risen significantly, with petrol climbing by 20p and diesel by 40p in the period following the escalation of hostilities.

The sharp increase in fuel costs follows a spike in crude oil prices, which were further disrupted by the conflict’s impact on oil shipments through the Strait of Hormuz. As a foundational component of both petrol and diesel, crude oil directly influences the cost of fuel at the pump. The price of a barrel of Brent crude, the global standard for oil pricing, has shown extreme fluctuations, rising from $73 (£55) to over $110 before settling near $100 by the end of March.

Analysts estimate that each $10 rise in oil prices translates to a 7p increase in fuel costs per litre. However, there is typically a delay of about two weeks before these changes affect pump prices. For instance, a month after the conflict began, the cost of filling a standard family car with petrol has risen by £11, while diesel has increased by £22 compared to pre-conflict levels.

Despite the sharp uptick, current fuel prices remain below the peaks seen during the summer of 2022, when Russia’s invasion of Ukraine triggered widespread inflation. At that time, petrol prices reached 191.5p per litre and diesel hit 199p. As of 2 April, RAC data shows petrol averaging 153.7p and diesel at 184.2p per litre.

Accusations of Price Gouging

Concerns have emerged about potential price gouging by fuel retailers, though they have denied the allegations. The UK’s official market regulator is examining the matter to determine if any unfair practices are at play.

The nation’s heavy dependence on oil and gas imports, primarily sourced from the US and Norway, means global oil prices directly dictate domestic fuel costs. While the UK produces some oil from the North Sea, most of this is exported for refining, leaving the country vulnerable to international market shifts.

Global Impact and Resilience Claims

Shell’s executive warned of a potential European fuel shortage within weeks, citing blockages in the Strait of Hormuz. This follows the International Energy Agency (IEA) recommending measures like remote work and carpooling to curb energy demand. Nonetheless, the UK government and the Fuels Industry UK assert that the country’s fuel supply remains stable, with no immediate threat to availability.

Oil accounts for 35% of the UK’s total energy supply, according to the Department for Energy Security and Net Zero. As an IEA member, the UK is required to maintain a 90-day stockpile of net oil imports, a target it has already exceeded. Some argue easing restrictions on North Sea drilling could help ease price pressures, but others question its effectiveness in lowering costs for households.

Higher fuel prices are expected to increase transport expenses for businesses, potentially leading to cost hikes for consumers. Additionally, crude oil is used in fertiliser production, which could indirectly affect food prices. “There may be implications for food costs,” said Benjamin Godwin of PRISM Strategic Intelligence, adding that if the conflict resolves quickly, food price increases are unlikely to materialise immediately.

While domestic gas and electricity bills are temporarily protected from wholesale price changes, the upcoming energy price cap in July could see adjustments depending on the conflict’s duration. Consumers who locked in fixed-price deals will avoid immediate hikes, but suppliers are now recalibrating their offerings, with cheaper options being withdrawn from the market.

Heating oil, crucial for households in Northern Ireland and some rural areas, is particularly sensitive to oil price swings. The recent global instability has already raised costs for those relying on this fuel source, highlighting the broader economic ripple effects of the ongoing crisis.