UK petrol prices reach peak amid ongoing Middle East conflict

Petrol prices in the United Kingdom have climbed to their highest level since the onset of the Iran war, placing further financial strain on motorists. The average cost has surpassed 163p per litre, according to data from motoring organisation the RAC. The group cautioned that pump prices could continue to rise as the conflict persists.

Fuel costs are closely linked to wholesale oil prices, which surged when hostilities commenced on 28 February. The fighting has caused significant disruption to oil supplies throughout the Middle East region. Although prices experienced a sharp decline in June following an agreement between the United States and Iran for a framework deal to end the conflict, they have since increased again after peace negotiations broke down.

Crude oil is a primary component of petrol and diesel, meaning that elevated wholesale costs directly increase the expense of refuelling vehicles. Market dynamics such as demand levels and refining capacity also exert considerable influence on retail prices. Industry analysts estimate that for every $10 per barrel rise in the price of oil, pump prices increase by approximately 7p per litre.

The price of Brent crude, which serves as the global benchmark for wholesale oil, has displayed significant volatility since the war began. Reports of escalating conflict typically drive prices upward, while prospects for a ceasefire tend to push them down. Prior to the conflict, Brent traded at around $70 per barrel, but fighting drove it above $120. Following the signing of the framework deal in early July, prices retreated near the $70 mark. However, after peace talks collapsed, the price rose back above $100 and is currently hovering around $94.

While petrol has reached its peak since the war started, diesel remains below its previous high of 191.54p per litre recorded on 15 April. In early July, the RAC noted that average prices had fallen to lows of 150.59p for petrol and 164.52p for diesel. Since then, both have risen, with petrol now at 163.6p per litre and diesel at 184.99p.

Simon Williams, head of policy at the RAC, stated that drivers are likely to pay noticeably more at the pumps in coming weeks given that oil prices remain elevated. Despite current increases, fuel costs are still below the levels recorded in the summer of 2022 following Russia’s invasion of Ukraine, when petrol reached 191.5p per litre and diesel hit 199p.

Price movements in wholesale markets typically take about two weeks to be reflected at retail pumps due to the time required for oil transportation. Fuel retailers have rejected allegations of price gouging during the crisis. The official market regulator stated it had not found evidence that retailers were altering pricing strategies to exploit the situation.

The Middle East conflict has driven global oil prices higher by effectively closing the Strait of Hormuz, a critical route for oil and liquefied natural gas transport. Approximately 20% of global oil and gas passes through this waterway. Experts warn that even if an agreement is reached to reopen the strait, normal shipping levels will take time to resume, with potential economic impacts lasting for months.

The United Kingdom relies heavily on imported oil and gas, primarily from the US and Norway. The global market price determines what the UK pays for these imports. Although some North Sea oil is produced domestically, most of it is exported for refining elsewhere. In May, then Prime Minister Sir Keir Starmer announced that a planned 5p increase in fuel duty, originally scheduled for September, would be postponed until the end of December due to the conflict.