4 days ago
Faarea Masudand
Alex Daniel,Business reporters
Maskot/Getty Images
Motorists in the UK are already seeing cheaper fuel prices after the US and Iran agreed to end their war, with further falls expected in the coming weeks.
When the conflict began on 28 February, fuel costs jumped as the war significantly disrupted the production and transportation of energy across the Middle East.
However, in recent weeks they have dropped and the framework deal reached between the US and Iran has sent them to their lowest point since the first days of the war in early March.
Motoring group the AA said it expects pump prices to fall further and “the timing is perfect for the start of the summer holidays”.
How do wholesale oil prices affect the cost of petrol and diesel at the pump?
Crude oil is a key ingredient in petrol and diesel, which means that higher wholesale costs make filling up a car more expensive.
Analysts say every $10 (£7.53) increase in the oil price pushes up pump prices by roughly 7p a litre.
Since the war began, the price of a barrel of Brent crude – the global benchmark for wholesale oil prices – has been very volatile.
Before the conflict, Brent was about $70 a barrel, but the conflict saw it peak at above $120.
What has happened to petrol prices in the UK?
According to the RAC, the price of petrol reached an Iran war peak of 159.53p a litre on 28 May, while diesel’s highest price during the conflict was 191.54p a litre on 15 April.
Since 28 May, the price of petrol has come down by 4.8p to 154.7p a litre, with diesel reducing by 10.3p to 174.3p a litre.
The RAC says it now costs £85.05 to fill up a 55-litre family car with petrol – £12 more than it did on 28 February – and £95.86 for a tank of diesel – £17.56 more than at the start of the conflict.
The RAC’s head of policy, Simon Williams, said: “Even more positively, the rate of reduction ought to accelerate as the price of a barrel of oil has been under $80 for the last two days – something we haven’t seen since the start of March.
He said the price of petrol could fall below 150p a litre over the next week. Diesel is likely to fall to under 170p, he added.
“If Brent crude stays at this level or reduces further, the longer-term picture at the pumps should get even better,” said Williams.
Despite the conflict, petrol and diesel prices remained below the levels reached in the summer of 2022 following Russia’s invasion of Ukraine, when petrol reached 191.5p a litre and diesel hit 199p.
Because transporting oil is a slow process, price movements in the wholesale markets take about a fortnight to show at the pump.
Fuel retailers have denied accusations of price gouging during the conflict. The official markets regulator said it had “not seen evidence of retailers actively changing their pricing strategies to take advantage of the crisis”.
Luke Bosdet, the head of policy at the AA, said the group had been surprised at the speed that prices had fallen and put it down to the scheme.
Bosdet added that despite price falls, road fuel is “still very expensive” compared with pre-pandemic levels when petrol was about 120p.
Why has the Iran war had a big impact on oil prices?
The Middle East conflict sent global oil prices soaring as it effectively closed the Strait of Hormuz – one of the world’s key water transport routes for oil, liquid natural gas and other essential commodities – limiting global supplies.
About 20% of the world’s oil and liquefied natural gas normally passes through the waterway.
Analysis by BBC Verify showed that only a handful of ships have passed through the strait since the conflict began – in normal circumstances around 138 vessels make the crossing every day.
However, experts warn a return to normal levels of shipping through the Strait of Hormuz will take time, and the impact of the war will continue to affect the global economy for potentially months to come.
Where does the UK get its oil and gas?
The UK is heavily reliant on oil and gas imports, with the majority coming from the US and Norway.
The price of oil on the global market determines how much the UK pays for it.
Although the UK does get some oil from the North Sea, most of that is exported for refining elsewhere.
