UK petrol has topped 150p a liter as fuel prices rise after the Iran conflict
UK motorists are facing a big hike in fuel costs, with petrol prices expected to exceed £1.50 a liter for the first time in nearly two years as the Middle East conflict continues to wreak havoc on energy markets.
According to the RAC, the price of petrol has already risen to 149.82p a liter and is likely to drop to 150p soon. Diesel prices rose sharply, reaching an average of 176.66p a litre, an increase of more than 34p since the strikes in Iran began.
The increase marks the highest diesel prices since the power crisis triggered by Russia’s invasion of Ukraine in late 2022, underscoring the sensitivity of fuel markets to country shocks.
The main reason for the increase is the rise in global oil prices. Brent crude is currently trading around $107 a barrel, having risen from around $70 last month and briefly nearing $120 in early June.
The RAC’s Simon Williams said fuel data showed petrol was likely to rise to 152p a liter and diesel to 185p.
“While rising costs at the pumps are stressing drivers, as long as oil stays around $100, prices should begin to stabilize,” he said, although he warned that further volatility is still possible depending on developments in the conflict.
Fuel prices continue to vary widely across the UK, with drivers in rural areas and service stations often paying higher prices.
Petrol prices in front road courts are already over 171p a litre, with some places charging more than 190p for diesel, with a few more than 200p. In contrast, drivers in parts of Lancashire are paying close to 143p for petrol, highlighting the region’s growing disparity.
The increase in fuel costs is expected to feed into a broader decline in inflation, affecting transportation costs, the supply chain and the price of goods and services.
For households, high prices of petrol and diesel are an immediate impact on income, especially for those who rely on cars to get to work or live in areas with limited public transport.
Businesses, especially those in transportation and logistics, are also facing rising operating costs, which may ultimately be passed on to consumers.
Although drivers face higher costs, the government will benefit from increased tax receipts. Fuel prices in the UK are subject to 20% VAT, which is applied on top of fuel duty, effectively creating a “tax levy”.
The RAC Foundation estimates that UK motorists consumed around 47 billion liters of petrol last year. Based on pre-conflict prices, this would have generated an estimated £13 billion in VAT revenue.
With petrol and diesel prices rising sharply, that figure is now expected to rise to around £15.5 billion, bringing in around £2.5 billion to the Exchequer.
The government has accused fuel sellers of profiting from price increases, although taxi drivers have rejected these claims, saying the higher sales costs are passed on to consumers.
The debate highlights ongoing tensions over fuel price transparency and the distribution of costs across the supply chain.
Much will depend on the path of oil prices in the coming weeks. If geopolitical tensions subside and provide stability, prices may rise or begin to fall. However, prolonged disruptions in global energy markets could increase costs.
Meanwhile, drivers are facing renewed volatility at the pumps, a reminder of how quickly global events can translate into daily economic pressures.
