UK petrol and diesel prices: average family car now £100 to fill up

Petrol and diesel now cost an average of 182.31p and 188.05p per litre respectively at the pumps


Mike Rutherford

Average petrol prices have reached new record highs, and it now costs over £100 to fill the 55-litre tank of an average family car with unleaded petrol. Diesel prices have risen too, taking the cost of the average fill up to more than £103. That’s based on figures from RAC Fuel Watch which says petrol has reached 182.31p per litre, while diesel is 186.57p per litre.

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RAC fuel spokesperson Simon Williams says crossing the £100 per tank threshold is a dark day for motorists, and that the upward inflationary pressure of fuel prices is bad news for everyone. The RAC is calling on the government to act to bring prices down.

“RAC research showing as many as eight-in-10 depend on their cars,” he says. “March’s 5p fuel duty cut now looks paltry as wholesale petrol costs have already increased by five-times that amount since the Spring Statement (25p). A further duty cut or a temporary reduction in VAT would go a long way towards helping drivers, especially those on lower incomes who have no choice other than to drive.”

The AA is calling for a 10p fuel duty cut, and wants the government to apply a fuel duty stabiliser that would reduce duty as prices go up, and increase it when they fall.

“A fuel price stabiliser is a fair means for the Treasury to help regulate the pump price but alongside this they need to bring in more fuel price transparency to stop the daily rip-offs at the pumps,” says AA spokesman Edmund King. “The £100 tank is not sustainable with the general cost of living crisis so the underlying issues need to be addressed urgently.”

Big supermarket fuel price hikes

RAC Fuel Watch data also showed that Asda hiked its average petrol price nearly 5p a litre in a single day on 8 June, which is unheard of. Other supermarkets followed suit, and as of 9 June the average petrol price at the big four supermarkets, which dominate fuel retailing, is now 175.91p, while diesel is 184.13p. 

“These are unprecedented times in terms of the accelerating cost of forecourt fuel. Sadly, it seems we are still some way from the peak. While the average price of diesel is heading towards £2 a litre, the cost of wholesale petrol unexpectedly dropped around 5p a litre on Tuesday. If this price is maintained in the coming days it could stem the flow of daily record petrol prices.”

The recent 5p-per-litre cut to fuel duty was meant to help drivers, but on average 4p of this was pocketed by retailers, with a plea by the business secretary for the savings to be passed on ignored.

The Treasury has  defended its existing measures, resisting calls to further cut fuel duty, cut VAT or pass its windfall from high fuel prices back to consumers in any other way. In fact, speaking to Auto Express a treasury spokesman denied there was a VAT windfall at all, because while VAT receipts from fuel are up, the overall VAT take is down due to reduced consumer spending on other goods and services.

Those driving for business are reminded they can claim their fuel VAT back, but private motorists are left facing unprecedented pump prices.

Why are diesel and petrol so expensive?

Russia is one of the world’s largest producers of oil and gas, so any disruptions to its production processes has a global impact.

With Russia having launched a full-scale invasion of Ukraine and facing international sanctions, there’s potential for significant disruption to supplies. Russia produces 4.5 million barrels of oil each day, and only Saudi Arabia produces more.

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The sanctions levied against Russia so far have targeted banks and oligarchs rather than the country’s energy sector, but factors such as Germany’s postponement of the Nord Stream 2 gas pipeline will have an effect on the energy market overall. Russia also has the ability to reduce oil exports to Europe in a tit-for-tat response to economic sanctions, and experts suggest Saudi Arabian oil fields could struggle to increase production sufficiently to counter such measures.

“Opec, the oil producers’ cartel, is already struggling to meet its output targets as demand for crude rebounds following the easing of lockdown restrictions. This has pushed up prices, with analysts warning there is limited capacity to increase supplies if flows from Russia are affected by sanctions,” the Financial Times newspaper has reported.

What makes up the price of UK fuel?

The price of fuel can be divided into three sections; the taxes imposed by the Government, the costs of drilling, refining and transporting, and the profit margins for the fuel companies.

For petrol, diesel and bioethanols, the Government gets around 65 per cent of the overall cost through fuel duty and value added tax (VAT). The fuel duty represents the fixed price of fuel – it stays the same regardless how much overall oil prices fluctuate. Currently, the Treasury adds 57.95 pence to each litre of fuel through fuel duty, and another 20 per cent through VAT. How much you pay in VAT depends on how much fuel you purchase.

The second biggest chunk comes from the wholesale costs of the fuel itself. The wholesale cost is a combination of currency exchange rates, global oil prices, and even domestic supply and demand.

When will fuel prices go down?

Experts predict high fuel costs will be with us for the foreseeable future, and it’s not just down to the crisis in Ukraine – energy costs have been high for the best part of a year already as demand surged as the world emerged from lockdown.

Part of the problem is down to the fact that relatively low barrel prices in recent years have put plans to drill for new reserves on hold. That’s true in Africa, the US and South America, and while the current high prices may increase interest in exploring new reserves, it can take years for new wells to come on stream in volumes required to affect the market.

Why is supermarket fuel cheaper than an independent forecourt?

Supermarket forecourts usually offer the cheapest fuel prices and this is because of the market power supermarkets hold. Companies like Asda, Tesco, Sainsbury’s and Morrisons are all in competition with one another, so they keep fuel prices as low as possible hoping that when motorists come to fill their tank, they might do their weekly grocery shopping, too. 

There are persistent rumours that supermarket fuel contains fewer additives and is of lesser quality than fuel from traditional forecourts, but there’s little hard evidence of this. All fuel sold in the UK has to abide by the standards set in the Motor Fuel Regulation. 

Why is fuel so expensive on motorways?

Motorway fuel stations argue the reason their prices are higher is that many of them are open 24 hours a day and offer more services than a regular forecourt. Motorway fuel stations also pay high rent prices for the buildings they operate.

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In more remote areas, fuel is often more expensive because of the higher transport and supply costs, but according to RAC fuel spokesman Simon Williams, this doesn’t apply to motorway stations: “We can see no reason why motorway fuel should be so much more expensive. In fact, arguably it is much easier from a delivery point of view than it is getting fuel to urban filling stations.”

Why is diesel more expensive than petrol?

Although diesel and petrol are taxed the same by the Treasury, historically diesel has been more expensive than petrol, as domestic refineries have struggled to meet demand. This has forced the UK to import diesel from other countries at a greater rate than petrol. In addition, diesel prices are pushed up by the cost of the additives that go into the fuel.

Furthermore, the gap between UK petrol and diesel prices widens during the winter. The end of the US “driving season” means retailers have a surplus of petrol they can’t export, so they sell it here at a lower price. Diesel demand, meanwhile, increases across continental Europe, where the fuel is commonly used in heating oil.

Recently, the influx of cheap diesel from countries like Saudi Arabia has turned the tide, swinging diesel wholesale prices closer to that of petrol, and bringing the pump price down with it. However the fact that we get a higher percentage of diesel from Russia than petrol means the advantage has swung the other way again.

What’s your view on fuel prices in the UK? Do we pay too much for our petrol and diesel? What would you do about it? Join the debate in our comments section below…

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