UK drivers are bracing for a sharp rise in fuel costs, with petrol prices expected to exceed £1.50 per litre for the first time in nearly two years as the fallout from the Middle East conflict continues to ripple through energy markets.
According to RAC, the average price of petrol has already climbed to 149.82p per litre and is likely to break through the 150p threshold imminently. Diesel prices have risen even more steeply, reaching an average of 176.66p per litre, an increase of more than 34p since strikes on Iran began.
The surge marks the highest diesel prices since the energy crisis triggered by Russia’s invasion of Ukraine in late 2022, underscoring the sensitivity of fuel markets to geopolitical shocks.
The primary driver of the increase is the sharp rise in global oil prices. Brent crude is currently trading at around $107 per barrel, having surged from roughly $70 a month ago and briefly approaching $120 earlier in June.
Simon Williams of the RAC said wholesale fuel data suggests further increases are likely in the short term, with petrol potentially reaching 152p per litre and diesel climbing towards 185p.
“While soaring costs at the pumps are putting a strain on drivers, as long as oil remains around $100, prices should begin to stabilise,” he said, though he cautioned that further volatility remains possible depending on developments in the conflict.
Fuel prices continue to vary significantly across the UK, with drivers in rural areas and at motorway service stations often paying the highest rates.
Petrol prices at motorway forecourts have already exceeded 171p per litre, while some locations are charging more than 190p for diesel, with a handful exceeding 200p. By contrast, drivers in certain parts of Lancashire are paying closer to 143p for petrol, highlighting a growing regional disparity.
The rise in fuel costs is expected to feed through into broader inflation, affecting transport costs, supply chains and the price of goods and services.
For households, higher petrol and diesel prices are an immediate hit to disposable income, particularly for those reliant on cars for commuting or living in areas with limited public transport.
Businesses, especially those in logistics and transport, are also facing increased operating costs, which may ultimately be passed on to consumers.
While drivers face rising costs, the government is set to 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 on a tax”.
The RAC Foundation estimates that UK motorists consumed nearly 47 billion litres of fuel last year. Based on pre-conflict prices, this would have generated around £13 billion in VAT revenue.
With petrol and diesel prices rising sharply, that figure is now expected to increase to approximately £15.5 billion, delivering an estimated £2.5 billion windfall to the Treasury.
The government has accused fuel retailers of profiteering from the price surge, although forecourt operators have rejected the claims, arguing that higher wholesale costs are being passed through to consumers.
The debate highlights ongoing tensions over fuel pricing transparency and the distribution of costs across the supply chain.
Much will depend on the trajectory of oil prices in the coming weeks. If geopolitical tensions ease and supply stabilises, prices could plateau or begin to fall. However, a prolonged disruption to global energy markets could push costs higher still.
For now, drivers face a renewed period of volatility at the pumps, a reminder of how quickly global events can translate into everyday economic pressures.
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Petrol set to top £1.50 a litre as Iran war drives fuel price surge