UK petrol and diesel costs: oil value softens however gas hits £2 per litre

High fuel prices. £2 per litre

Mike Rutherford

Russia’s invasion of Ukraine has despatched a shock via the worldwide oil market meaning UK motorists are actually being compelled to pay a mean of £1.67 a litre for unleaded. With higher stress on diesel costs, UK drivers should pay much more, and newest RAC figures report a mean value of £1.79 a litre.

Nevertheless many motorists are already paying considerably greater costs per litre than these averages, with reviews of diesel and premium grade petrol costs breaking the £2 a litre barrier by giant margins on some forecourts.

In keeping with the RAC, the obligation minimize may decrease the price of filling a mean household automobile from £92 to £89 if filling up with petrol, or from £98 to £95 when filling with diesel.

“We’re happy to see the Chancellor has given drivers some much-needed reduction on the pumps, however the actuality is {that a} 5p minimize in obligation is one thing of a drop within the ocean,” says RAC spokesman Nicholas Lyes. “In actuality, decreasing it by 5p will solely take costs again to the place they have been simply over every week in the past.”

Earlier hopes that the disaster in world oil markets had eased barely have been dimmed this week, as wholesale costs began to rise once more. RAC gas spokesman Simon Williams stated: “The window for pump costs to return down seems to have been properly and actually closed, with each oil costs and due to this fact wholesale gas prices as soon as once more rising after final week’s large drop, placing but extra stress on households and companies. In simply the final week, the common value of a litre of petrol has gone up 3.5p and diesel by a staggering 5.5p. 

The RAC has additionally identified that guaranteeing all drivers pretty and absolutely profit from the gas obligation minimize relies upon totally on retailers decreasing their costs, as a substitute of retaining further revenue. Previous to the price range announcement, the RAC had been calling for a VAT minimize as a substitute, which might have ensured the reduction could be handed to drivers.

Wanting forward, specialists advised an MPs choose committee on 14 March that additional rises have been probably in the price of a barrel of oil, as international locations scrabble to switch provides from Russia. Nathan Piper, oil skilled at monetary companies agency Investec advised MPs: “If extra stringent actions are imposed upon Russia, and 5 million barrels a day is really taken out of the market, then oil costs would actually don’t have any ceiling.”

PM Boris Johnson travelled to the Center East on a mission in mid-March in an effort to get nations like Saudi Arabia to open the faucets wider. 

Why are diesel and petrol so costly?

Russia is likely one of the world’s largest producers of oil and gasoline, so any disruptions to its manufacturing processes has a worldwide affect.

With Russia having launched a full-scale invasion of Ukraine and going through worldwide sanctions, there’s potential for vital disruption to provides. Russia produces 4.5 million barrels of oil every day, and solely Saudi Arabia produces extra. 

The sanctions levied in opposition to Russia thus far have focused banks and oligarchs relatively than the nation’s power sector, however components equivalent to Germany’s postponement of the Nord Stream 2 gasoline pipeline will impact the power market total. Russia additionally has the flexibility to scale back oil exports to Europe in a tit-for-tat response to financial sanctions, and specialists counsel Saudi Arabian oil fields may wrestle to extend manufacturing sufficiently to counter such measures.

“Opec, the oil producers’ cartel, is already struggling to fulfill its output targets as demand for crude rebounds following the easing of lockdown restrictions. This has pushed up costs, with analysts warning there may be restricted capability to extend provides if flows from Russia are affected by sanctions,” the Monetary Instances newspaper has reported.

fuel pump

What makes up the worth of UK gas?

The worth of gas may be divided into three sections; the taxes imposed by the Authorities, the prices of drilling, refining and transporting, and the revenue margins for the gas firms.

For petrol, diesel and bioethanols, the Authorities will get round 65 per cent of the general value via gas obligation and worth added tax (VAT). The gas obligation represents the fastened value of gas – it stays the identical regardless how a lot total oil costs fluctuate. At present, the Treasury provides 57.95 pence to every litre of gas via gas obligation, and one other 20 per cent via VAT. How a lot you pay in VAT is dependent upon how a lot gas you buy.

The second largest chunk comes from the wholesale prices of the gas itself. The wholesale value is a mix of forex alternate charges, world oil costs, and even home provide and demand.

When will gas costs go down?

Specialists predict excessive gas prices can be with us for the foreseeable future, and it’s not simply all the way down to the disaster in Ukraine – power prices have been excessive for the very best a part of a yr already as demand surged because the world emerged from lockdown.

A part of the issue is all the way down to the truth that comparatively low barrel costs lately have put plans to drill for brand new reserves on maintain. That’s true in Africa, the US and South America, and whereas the present excessive costs could improve curiosity in exploring new reserves, it might probably take years for brand new wells to return on stream in volumes required to have an effect on the market.

Why is grocery store gas cheaper than an impartial forecourt?

Grocery store forecourts normally supply the most cost effective gas costs and that is due to the market energy supermarkets maintain. Corporations like Asda, Tesco, Sainsbury’s and Morrisons are all in competitors with each other, in order that they maintain gas costs as little as attainable hoping that when motorists come to fill their tank, they may do their weekly grocery procuring, too. 

There are persistent rumours that grocery store gas comprises fewer components and is of lesser high quality than gas from conventional forecourts, however there’s little onerous proof of this. All gas offered within the UK has to abide by the requirements set within the Motor Gas Regulation. 

petrol prices

Why is gas so costly on motorways?

Motorway gas stations argue the rationale their costs are greater is that lots of them are open 24 hours a day and supply extra companies than a daily forecourt. Motorway gas stations additionally pay excessive lease costs for the buildings they function.

In additional distant areas, gas is usually dearer due to the upper transport and provide prices, however in line with RAC gas spokesman Simon Williams, this doesn’t apply to motorway stations: “We are able to see no purpose why motorway gas ought to be a lot dearer. Actually, arguably it’s a lot simpler from a supply viewpoint than it’s getting gas to city filling stations.”

Why is diesel dearer than petrol?

Though diesel and petrol are taxed the identical by the Treasury, traditionally diesel has been dearer than petrol, as home refineries have struggled to fulfill demand. This has compelled the UK to import diesel from different international locations at a higher fee than petrol. As well as, diesel costs are pushed up by the price of the components that go into the gas.

Moreover, the hole between UK petrol and diesel costs widens throughout the winter. The top of the US “driving season” means retailers have a surplus of petrol they will’t export, in order that they promote it right here at a cheaper price. Diesel demand, in the meantime, will increase throughout continental Europe, the place the gas is often utilized in heating oil.

Just lately, the inflow of low-cost diesel from international locations like Saudi Arabia has turned the tide, swinging diesel wholesale costs nearer to that of petrol, and bringing the pump value down with it. Nevertheless the truth that we get the next share of diesel from Russia than petrol means the benefit has swung the opposite method once more.

What’s your view on gas costs within the UK? Can we pay an excessive amount of for our petrol and diesel? What would you do about it? Be part of the talk in our feedback part beneath…

Patrick Moore

Patrick is our chief editor and he's very passionate about cars. He has a bachelor's degree in marketing and he studies journalism. His favorite brand is BMW and he drives an X5 series. When he's not writing for, he enjoys spending time with his family and 9 years old son.

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