UK fuel prices are increasing again following the collapse of peace talks to end the conflict between the US, Israel, and Iran.
When the conflict began on 28 February, fuel prices surged as the fighting severely disrupted the production and transportation of energy across the Middle East. This disruption had a significant impact on the global energy market, leading to higher fuel prices.
Prices then decreased when the US and Iran agreed to a framework deal to end the fighting in June, but have started increasing as tensions resurface. Motoring firm RAC’s head of policy, Simon Williams, said “the increases are likely to keep coming thick and fast”.
The cost of petrol and diesel at the pump is closely tied to wholesale oil prices. Crude oil is a key ingredient in petrol and diesel, which means that higher wholesale costs make filling up a car more expensive. Analysts say every $10 (£7.53) increase in the oil price pushes up pump prices by roughly 7p a litre.
Since the conflict began, the price of a barrel of Brent crude – the global benchmark for wholesale oil prices – has been very volatile. Before the conflict, Brent was about $70 a barrel, but the conflict saw it peak at above $120. In early July, after the framework deal was signed, prices fell back to the near $70 a barrel mark, but have climbed back up again since to around $87 a barrel.
According to the RAC, the average price of petrol reached a peak of 159.53p a litre on 28 May, while diesel’s highest average price during the conflict was 191.54p a litre on 15 April. In early July, the RAC said the average price of diesel sank to a low of 150.50p per litre for petrol and 164.52p per litre for diesel. Since then, the prices have been rising, and according to its latest data, petrol now costs 152.54p a litre while diesel costs 167p a litre.
The RAC’s Williams says they are likely to continue rising because of the jump in the Brent crude price. Despite the conflict, petrol and diesel prices remain below the levels reached in the summer of 2022 following Russia’s invasion of Ukraine, when petrol reached 191.5p a litre and diesel hit 199p. Because transporting oil is a slow process, price movements in the wholesale markets take about a fortnight to show at the pump.
Fuel retailers have denied accusations of price gouging during the conflict. The official markets regulator said it had “not seen evidence of retailers actively changing their pricing strategies to take advantage of the crisis”. A government scheme called Fuel Finder lets drivers compare the cost of fuel offered by petrol stations across the UK. Luke Bosdet, the head of policy at the AA, said the group had been surprised at the speed that prices had fallen and put it down to the scheme.
On 20 May, Prime Minister Sir Keir Starmer said a planned 5p increase in fuel duty due in September would be postponed until 31 December because of the conflict. The Iran conflict has had a significant impact on oil prices, as it effectively closed the Strait of Hormuz, one of the world’s key water transport routes for oil, liquid natural gas, and other essential commodities, limiting global supplies. About 20% of the world’s oil and liquefied natural gas normally passes through the waterway.
Despite the deal between the US and Iran, experts warn that a return to normal levels of shipping through the Strait of Hormuz will take time, and the impact of the war will continue to affect the global economy for potentially months to come. The UK is heavily reliant on oil and gas imports, with the majority coming from the US and Norway. The price of oil on the global market determines how much the UK pays for it. Although the UK does get some oil from the North Sea, most of that is exported for refining elsewhere.
