Motorists in the UK are facing a sharp rise in fuel costs. Petrol prices are set to rise above £1.50 a liter for the first time in almost two years as the fallout from the Middle East conflict continues to be felt in energy markets.
According to the RAC, the average price of petrol has already risen to 149.82p per liter and is expected to break the 150p threshold soon. Diesel prices have risen even more, reaching an average of 176.66 pence per litre, a rise of more than 34 pence since the attacks on Iran began.
The increase marks the highest diesel price since the energy crisis triggered by Russia’s invasion of Ukraine in late 2022 and underscores the sensitivity of fuel markets to geopolitical shocks.
The main driver of the increase is the sharp rise in global oil prices. Brent crude oil is currently trading at around $107 a barrel, having risen sharply from around $70 a month ago and briefly approaching $120 in early June.
The RAC’s Simon Williams said wholesale fuel data suggests further increases are likely in the short term, with petrol potentially reaching 152p a liter and diesel rising to 185p.
“While rising costs at the pumps are weighing on motorists, prices should begin to stabilize as long as oil prices remain around $100,” but he warned that further volatility was possible depending on how the conflict develops.
Fuel prices continue to fluctuate significantly across the UK, with drivers in rural areas and motorway service areas often paying the highest prices.
Petrol prices on motorway forecourts are already over 171p a liter, while some locations are charging more than 190p for diesel and some are even over 200p. In contrast, motorists in certain parts of Lancashire are more likely to pay 143p for petrol, pointing to growing regional inequality.
The rise in fuel costs is expected to lead to broader inflation and impact transportation costs, supply chains and the prices of goods and services.
For households, higher gasoline and diesel prices have an immediate negative impact on disposable income, particularly for those who rely on cars to commute or live in areas with limited public transportation.
Businesses, particularly in the logistics and transportation sectors, are also facing increased operational costs, which may ultimately be passed on to consumers.
As costs for drivers rise, the government stands to benefit from higher tax revenues. Fuel prices in the UK are subject to a 20% VAT, which is levied on top of fuel duty, effectively creating a “tax on a tax”.
The RAC Foundation estimates that British motorists used almost 47 billion liters of fuel last year. Based on pre-conflict prices, this would have resulted in around £13 billion in VAT revenue.
With petrol and diesel prices rising sharply, this figure is now expected to rise to around £15.5 billion, which would give the Treasury an estimated profit of £2.5 billion.
The government has accused fuel retailers of profiting from the price rise, but gas station operators have rejected the claims, saying higher wholesale costs are being passed on to consumers.
The debate highlights ongoing tensions over the transparency of fuel prices and the distribution of costs along the supply chain.
A lot will depend on the development of oil prices in the coming weeks. As geopolitical tensions ease and supply stabilizes, prices could plateau or begin to fall. However, continued disruption in global energy markets could drive costs even higher.
For now, drivers face another period of volatility at the pumps, reminding us how quickly global events can translate into everyday economic pressures.
