As diesel nears £2 per litre, could petrol be next?
The government is facing pressure to act on fuel prices as diesel edges closer to £2 per litre – with significant ramifications for businesses.
Tim Wray, managing director of Felixstowe-based Multimodal Logistics, estimated the cost of fuelling his fleet of 80 44-tonne HGVs to now be up to £20,000 extra per week.
Wray, who is also vice-chairman of the Road Haulage Association, said the average cost of diesel (excluding VAT) has risen from £1.08 per litre before the war in Iran to around £1.65 today.
“Fuel is around a third of a typical operator’s costs at a normal price,” he said. “If your fuel goes to 50% of your costs, you have very little left to operate and to trade, and businesses will start to struggle.”
On Sunday, Liberal Democrats leader Ed Davey called on the Labour government to cut fuel duty by 10ppl until Christmas. He also urged it to scrap the 3p increase in fuel duty, which is planned for January.
According to James Hitchman, operations director at fuel comparison website PetrolPrices, around 1000 forecourts across the UK are already charging 199.9ppl for diesel, and he said he wouldn’t be surprised if the national average passes £2 very shortly.
This is a view shared by Simon Williams, the RAC’s head of policy, who expects diesel to break the price record set in the summer of 2022.
Could petrol hit £2?
As for petrol prices, Nigel Driffield, a fuel economics professor at Warwick Business School, said £2 per litre at the pumps “is not unrealistic” but it remains possible rather than probable.
“We are definitely on an upward climb and appear to be about back to the peak back in April, although not climbing as quickly as then,” he said. “If I had to guess, I’d say that at the moment oil prices are pricing in further chaos, so there might be more likelihood of pricing calming than spiking – but that’s not much more than a guess.”
Hitchman is also doubtful that petrol will reach £2 per litre. In the near term, he expects prices to peak around the 175ppl mark. Before then, he believes there is another 3-4ppl price increase still to come at the pumps over the next seven to 10 days, but “there’s nothing in the markets at the moment for them to suggest that it would go higher than that”.
For unleaded petrol to get to £2 per litre, Hitchman said “the UK would have to see sustained issues with global supply and potentially local UK issues as well”.
Energy market intelligence provider Argus Media isn’t expecting petrol prices to rise much further for now.
Sarah Raffoul, a manager in its consulting division, said: “Europe is not facing a physical shortage of gasoline. However, the market has less cushion than normal.”
She said that refiners “have increasingly prioritised diesel and jet fuel production” while petrol stocks remain lower than normal, leaving the market more exposed if supplies are disrupted.
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