Unravelling the Factors Behind Rising UK Petrol Prices

Feb 3, 2024

When it comes to petrol prices, the upwards trajectory we are seeing at home is reflective of global trends. However, there are also specific factors at play within UK borders that contribute to these higher costs.

Global Crude Oil Prices:

This is a biggie - as a country that is reliant on imported oil the UK is directly influenced by fluctuations in crude oil prices. Recent changes in the market have largely been driven by political tensions. Related production decisions made by major oil producing nations have had a direct impact on imported oil costs and ultimately shape petrol prices across the UK.

Currency Exchange Rates:

The strength or weakness of the pound against other currencies plays a crucial role in determining imported petrol costs. Fluctuations in currency exchange rates can influence what consumers end up paying at petrol stations and when the pound is weak, you’ll find you get less for your money at the pump - which is something we’ve been seeing the last year or so.

Fuel Taxes:

Domestic policies such as fuel duty and taxes imposed by the UK government significantly contribute to petrol prices. Adjustments made to taxation policies can directly affect how much consumers pay for each litre of petrol. To offset the price hikes, the government introduced a windfall tax in May 2022 which is set to be in place until 2028, which they promise should help keep prices under control.

Environmental and Regulatory Factors:

As in the rest of the world, there is an increased focus on sustainability and transitioning to cleaner energy sources. This emphasis contributes to the cost of petrol as investments in technologies and adherence to environmental regulations can introduce additional expenses for traditional petrol production.

Retailer Competition & Supply:

Even within the UK, drivers will see differing prices in different locations on different days. This is due to a number of key factors - competition and demand for fuel in the area (vs. supply), transportation, distribution and storage costs and even the time of year. This means the price rise you’ve seen at your local station might be higher than the one down the road.

Conclusion:

Ultimately, as a nation that imports we are particularly susceptible to the impact of global events. The international market sets the baseline cost in terms of the prices of crude oil and the economic landscape and we are then reliant on our legislators to offset these factors and make sure the price we pay is a fair one - the increase we have been experiencing in recent times exemplifies this.

For more ideas on how to save money, take a look at our comprehensive guide to unlocking better fuel efficiency.