UK fuel prices 2023: why petrol and diesel costs could be on the rise after three months of reductions
Prices bottomed out in January as surge in oil demand looks set push costs upwards
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Drivers have been warned to expect price increases at the petrol pumps after three months of falling costs.
New data shows that average prices bottomed out in mid January and industry experts have warned they are rising again as the wholesale cost of fuel starts to creep back up. One warned that petrol could quickly soar back to more than £1.50 per litre due to volatile oil prices.
The news comes as fuel giant Shell revealed its annual profits have more than doubled, reaching a record £68.1 billion last year as a result of skyrocketing oil prices.
Figures from the RAC show that between the start and end of January average petrol prices fell by 3p per litre. However, at one point mid-month, petrol had fallen by 3.5p before rising back to 148.89p at the end of the month. The average price of diesel dropped by 4p from 174.37p to 170.37p – a price last seen in March 2022.
Pump prices are dictated by the wholesale price of oil which rose in late January to around $88 a barrel after dropping as low as $68 at the start of the month. According to the RAC, this has added around 2p per litre onto the wholesale price of petrol and 3p onto diesel since the start of the year.
The motoring group’s fuel spokesman, Simon Williams, said: “Although January saw fuel prices fall for the third month in a row, there is now more cause for concern than celebration as petrol has already begun to creep back up very slightly.
“Monthly reductions of 3p for petrol and 4p for diesel were welcome but sadly the first month of the year saw the wholesale price of petrol rise by 2p and diesel by 3p. Despite this, while unleaded has been overpriced for months due to the biggest retailers refusing to lower their prices in line with the lower wholesale price, diesel is still too expensive even after factoring in the slight wholesale uptick.”
AA fuel price spokesman Luke Bosdet said: “After a fall of close to 43p a litre since the summer record, drivers feared that a rebound in petrol prices would eventually happen.
“So far, pump price averages have risen only slightly. But today’s price is only 0.9p below the average price at the start of the Ukraine war on February 24 when pump prices surged.”
Fuel at the big four supermarkets, which dominate the UK fuel market, was around 3p per litre cheaper than the national average and Williams said it was “encouraging” that the country’s biggest fuel sellers had chosen not to pass on the recent wholesale price rises.
However, he warned that as China emerges from its most recent Covid restrictions, the increase in demand for oil could hit UK motorists. He said: “As always drivers’ fate at the pumps very much depends on what happens with the price of oil. But with the barrel now trading consistently well above $80 and analysts predicting a rise to $90 due increased demand from a re-opened China following the end of its zero-Covid policy, there is a very real risk that we could see petrol prices go back up to an average of 155p all too quickly.
“Eyes will also be on the Chancellor next month when he delivers his Spring Budget, so we hope he refrains from pouring fuel on the inflationary fire by hiking duty.”