UK petrol prices reach highest level since Iran conflict began

Petrol prices in the United Kingdom have climbed to their most expensive point since hostilities commenced between Iran and its neighbours, placing additional financial pressure on drivers across the country. According to motoring group the RAC, the average cost of fuel has surpassed 160p per litre as geopolitical tensions continue to influence global energy markets.

Fuel costs generally follow wholesale oil prices which surged when fighting erupted in the Middle East region following a conflict that began on 28 February. The violence severely disrupted supply chains across the area. Although pump prices dropped significantly after US and Iran agreed to a framework deal intended to end the hostilities in June, they have increased again since peace negotiations failed.

Crude oil serves as a primary ingredient for both petrol and diesel production, meaning that elevated wholesale costs directly translate into higher expenses at service stations. Analysts note that every ten dollar increase per barrel of crude oil pushes pump prices up by approximately seven pence per litre in the UK market. Since the war started, Brent crude has shown considerable volatility. Prior to the conflict, a barrel cost around seventy dollars but peaked above one hundred and twenty dollars during periods of intense fighting.

In early July following the signing of an agreement, prices retreated near the seventy dollar mark before climbing back above one hundred dollars when talks collapsed. Current levels hover around eighty dollars per barrel. While petrol has reached its peak since the conflict began, diesel remains below the record high of 191.54p achieved on 15 April this year.

Simon Williams, head of policy at the RAC, stated that filling a family car with diesel now costs one hundred pounds again, a level drivers have not faced since early June. There is hope for future reductions pending discussions to reopen the Strait of Hormuz. Despite these rises, current prices remain lower than summer 2022 levels following Russia’s invasion of Ukraine when petrol hit 191.5p and diesel reached 199p.

Transporting oil is a slow process causing wholesale market movements to take about two weeks before appearing at the pump. Retailers have denied accusations of price gouging, with regulators stating there is no evidence that stations are actively changing pricing strategies to exploit the crisis. The government scheme Fuel Finder allows drivers to compare costs across UK petrol stations.

Luke Bosdet from the AA noted they were surprised by how quickly prices fell and attributed this partly to the comparison scheme. On 20 May, then Prime Minister Sir Keir Starmer announced a planned five pence increase in fuel duty due in September would be postponed until 31 December because of the ongoing conflict.

The Middle East situation sent global oil prices soaring by effectively closing the Strait of Hormuz, one of the world’s key water transport routes for liquid natural gas and essential commodities. Approximately twenty percent of global oil and liquefied natural gas normally passes through this waterway. Even if a deal is agreed to reopen the strait, experts warn it will take time before normal shipping levels resume.

The impact of the war could affect the global economy for potentially months to come as supply chains adjust. The UK remains heavily reliant on oil and gas imports with most coming from Norway and the United States. Although some domestic production exists in the North Sea, much is exported for refining elsewhere.