Petrol and diesel prices

Recent trends in road fuel prices

Oil prices jumped on 24 February, when Russia lauched its full-scale invasion of Ukraine, and continued to rise through early March. This led to very large increases in road fuel prices to new record levels in early and mid-March. 

The rates of duty on petrol and diesel were cut by five pence per litre on 23 March 2022. This initially led to a fall in the price of both fuels, but by less than five pence per litre. This drop in prices was soon reversed and there were particularly large increases in late May and June. Both petrol and diesel prices have set and broken many new records in this period. They peaked on 4 July at 191.6 and 199.2 pence per litre for petrol and diesel respectively. Prices fell gradually over the following four months before increasing again in October.

The high international oil prices are magnified in the UK due to the relative weakness of Sterling. Crude oil prices in Sterling reached their highest ever levels in 2022. On top of this there were record refinery margins in early 2022, initially for diesel and latterly for petrol, due to a fall in refinery output/capacity and the impact of the war in Ukraine. This explains the rapid increase in road fuel prices between May and July 2022 at a time when oil prices have increased more slowly.

The gap between petrol and diesel prices increased in September and Octoebr 2022 and reached a new record level. The refinery margin for diesel in North West Europe (including the UK) has increased sharply in recent weeks due to strikes and maintenance at refineries. Europe exports petrol, but imports diesel, so this reduced refinery capacity has a greater impact on diesel prices.

This paper looks at trends in the price of petrol and diesel at the pump and before tax, possible reasons for the gap in prices between the two fuels and compares prices and taxes in different countries.

Trends in the pump and pre-tax price of road fuel and other petroleum products are given in The Department for Business, Energy and Industrial Strategy’s Collection of road fuel and other petroleum product price statistics. The AA’s Fuel Price Reports have national, regional and international average prices. The RAC’s Fuel Price Watch includes up to date prices, longer term trends and a breakdown of the different price components. Petrolprices gives regional local figures. The Hydrocarbon Oils Bulletin from HMRC includes details of changes in duty rates and revenues. The European Commission’s Weekly Oil Bulletin gives a weekly comparison of pump and pre-tax prices of fuels across the EU. The International Energy Agency’s Monthly Oil Prices shows trends in fuel prices for the largest OECD economies. Their Oil Market Report gives background to changes in oil and product prices. Oil price data is summarised in the Library briefing Oil prices.

An appendix to this note looks at the real cost of petrol since 1920 and the real value of duty and VAT per litre. Prices in January 2012 were just above their earlier post second world war high in real terms -set during the Suez crisis- but still below the real prices charged in 1920 when petrol pumps were first introduced. The total tax on a litre of petrol peaked in early 2010; the latest figure is around 30% below this peak.

The associated spreadsheet to this paper includes the following reference tables:

• Breakdown of typical UK road fuel since 1990
• Latest average Petrol and Diesel Prices and Taxes in the EU and UK
• Petrol prices since 1920