UK drivers could face a substantial hike in fuel prices should crude oil reach $100 a barrel, according to new analysis from the RAC. The motoring organisation has warned that such an increase in the global oil market would likely translate to an additional 7p per litre for petrol and 8p per litre for diesel at forecourts across the country, further straining household budgets.
Currently, the average price of a litre of unleaded petrol stands at 151.67p, while diesel is slightly higher at 156.09p. A 7p increase on petrol would push the average price towards 158.67p per litre, making the cost of filling a typical 55-litre family car approximately £87.27. For diesel drivers, an 8p rise would see prices nearing 164.09p per litre, costing around £90.25 to fill the same vehicle.
The price of fuel at the pump is influenced by several factors, including the wholesale price of crude oil, refining costs, distribution, retailer margins, and government taxation. Fuel duty is currently set at 52.95p per litre, a rate frozen by the Chancellor of the Exchequer, alongside a 20% Value Added Tax (VAT) applied to the total price, including the duty.
Rising global oil prices are primarily attributed to production cuts by OPEC+ nations, particularly Saudi Arabia and Russia, combined with a steady increase in global demand. This supply-demand dynamic creates upward pressure on wholesale costs, which are then passed on to consumers. The RAC's warning highlights the direct link between international commodity markets and the everyday expenses of UK citizens.
The potential for higher fuel costs comes at a time when many UK households are already grappling with the ongoing cost-of-living crisis, characterised by high inflation across various sectors. Increased transport costs could impact disposable incomes, potentially affecting spending on other goods and services, and adding to inflationary pressures within the wider economy.
While the Government has previously intervened with a temporary 5p per litre cut in fuel duty in March 2022, the current focus remains on maintaining the existing freeze. Any further intervention would likely be a significant policy decision, weighing the need to support motorists against the fiscal implications for the Treasury.