Petrol prices hit new highs in the UK this week with the price of unleaded being around 185.4p on Monday on average, and diesel costing consumers somewhere in the region of 191.2p for every litre.
The rising costs caused a row between retailers and the government, with ministers accusing petrol stations of not fully passing on the 5p cut in fuel duty that Rishi Sunak announced in the spring. However, the cost of unleaded fuel has gone up by almost 20p since then, largely driven by wider market forces outside of forecourts’ control.
It has led some to suggest that the government needs to stop fixating on this issue and bring in further support. RAC fuel spokesman Simon Williams claimed that wholesale prices are the bigger issue.
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Why is petrol so expensive in the UK?
The price of unleaded petrol or diesel you pay when you go to fill up your car is largely decided by the price of crude oil in the wider economy. Fuel prices have been continually rising as we’ve got back to ‘normal’ following the Covid pandemic, with many suppliers struggling to ramp back up their output to deal with the greater demand for petrol that an open economy needs.
The war in Ukraine has created a further negative shock on prices, with sanctions being imposed on Russia and many countries either banning imports of their oil or publicly declaring they are going to wean themselves off them. Russian oil only accounts for around 6% of UK imports but the invasion has meant there are greater demands for other suppliers (such as Saudi Arabia), pushing the price up elsewhere.
There are also some concerns that retailers are not passing on the 5p fuel duty cut that Chancellor Rishi Sunak brought in in March, with Levelling Up Secretary Michael Gove saying: “I think we do need to keep a watch on this and I know that the Competition and Markets Authority and others will always keep an eagle eye in order to make sure we don’t have a situation where companies are taking unfair advantage of consumers.”
How much fuel duty tax do we pay in the UK?
The current rate of fuel duty in the UK is 52.95 pence per litre, including the 5p cut on the tax the government made in March, and equates to around 29% of the overall cost of the price of unleaded petrol you pay at the pump – according to the RAC on data from June 9. There is also a 20% VAT rate on top of this, which contributes to 17% of the price you pay for unleaded at your local forecourt.
The government has continually faced calls from industry bodies to increase the fuel duty cut they introduced in the spring. AA president Edmund King said: “The government must act urgently to reduce the record fuel prices which are crippling the lives of those on lower incomes, rural areas and businesses.”
