Fuel prices

Over the five years through 2025-26, IBISWorld estimates that the price of diesel will rise at a compound annual rate of 3.4%.

The world price of crude, a predominant factor in the price of UK fuel prices – the world price is surging in 2023. This was due to a number of factors, including an oversupply stemming from increased US oil production, a breakdown in the Organization of the Petroleum Exporting Countries (OPEC) price control and prior expectations surrounding the removal of sanctions on Iranian oil exports. Falling demand led by weak industrial performance in emerging market economies further exacerbated the fall in the price of crude oil. However, the price of oil has since crept upwards through to the beginning of 2020 as OPEC and non-OPEC nations, led by Russia, agreed to cut production to better match supply with demand. Though prices tumbled over the beginning of 2020, following collapse of the détente between the major oil producing nations and the lack of global demand. This low price led to prices collapsing in 2020-21, due to the reduced level of global demand as a result of the pandemic.

Volatility in the price of fuel is largely caused by variations in the world price of crude oil, the major input in to the refining process. The costs of production, storage and transportation are also factored in to the price paid at the pump. Exchange rates also have an effect on the price paid by fuel producers for inputs, as these are priced in dollars, that will feed through in to changes in the final pump price. The high price of fuel at UK pumps is a result of high fuel duty and VAT, which has meant that fuel in the United Kingdom has been among the most expensive in the world over the long-term. The United Kingdom is the only country where diesel and petrol duty rates are the same - frozen until March 2023, the UK fuel excise duty rate for petrol and diesel is set at just under 53 pence per litre. This follows the reversal of a government decision that from April 2021, the duty will be uprated in line with the Retail Price Index, as the government saw this as a drag to economic recovery.

Diesel and petrol prices move in tandem as they are affected by similar trends, but diesel is over-inflated and slightly more expensive - as of April 2021, the retail price of diesel (129.2 pence per litre) was 3.8 pence per litre more expensive than the retail price of premium unleaded petrol (125.5 pence per litre). Taxes, in the form of both VAT and fuel duty, have remain unchanged throughout the period and not contributed towards and change in the price of fuel.

Through the majority of the period, forecourt diesel prices have continued to rise, largely in response to rising petrol wholesale costs. Retailers, particularly the UK's four largest supermarkets, have held diesel prices at an over-inflated level - this is despite the wholesale price of diesel falling lower than petrol - and refuted to cut the pump price of diesel despite evident scope to do so, instead continuing to use the saving from lower diesel wholesale prices to subsidise the headline petrol price, with a view to attracting more customers to their forecourts.

In 2020-21, globally low prices have seen many major oil companies experiencing substantial losses and caused the collapse of a large portion of the US shale industry, causing a lasting reduction of the shale industry, which has served to reduces supply. Additionally, prices have begun to rise from January 2021 on the back of hopes of a successful vaccination rollout and economic recovery of more economically developed countries from the second half of 2021. In 2021-22, the price rose by 20.8%, reaching 143 per litre. Prices surged due to a combination of the reopening of economies and Russia's ongoing invasion of Ukraine. Fears over fuel shortages in October 2021 led to long queues at filling stations as motorists across the United Kingdom began panic buying. This further drove prices during the year.

According to UK government data, prices spiked at 151.08 per litre in February 2022. In the same month, President Vladimir Putin announced that Russia was initiating a "special military operation" in the Donbas region, and proceeded to launch a full-scale invasion into Ukraine, which is still ongoing. This led to jump in fuel prices as global wholesale prices expanded. Sanctions on Russia by the government could limit supply, because the United Kingdom imports fuel from the country. In March 2022, the UK government announced it was phasing out Russian oil imports as part of ongoing sanctions, which is expected to reduce supply and inflate prices further. The government attempted to relieve the pressure on motorists with a 5p cut per litre – but it had limited effects because retailers were not passing on the cut to customers. ONS weekly prices for unleaded diesel reached 148.23 pence per litre, but prices are falling from the peak in July 2022 (197.38 pence per litre). Fuel prices decline by 14.5 to 154.5 pence per litre in 2023-24, as government tax breaks are finally passed on by supermarkets to consumers. Fuel prices are easing falling by 4.5% in 2024-25. The cost of petrol dropped to 132.3p per litre in June 2025 due to rising production from OPEC, leading to a drop in global oil prices.