Record fuel prices set to continue as experts warn of 150p-per-litre

Published 26 October 2021

Average fuel prices could hit 150p-per-litre in the first quarter of 2022, following this week’s record high of 142.94p for petrol. 

The warning comes as seven UK regions have now exceeded petrol's previous all-time peak of 142.48p-per-litre, which was reached on 16 April 2012.

Regional petrol prices 

Region Price (25 October 2021) 
East  143.38
East Midlands  142.67
London  143.09
North East  141.70
North West  142.66
Northern Ireland  140.69
Scotland  142.36
South East  143.57
South West  143.18
Wales  142.43
West Midlands  142.65
Yorkshire and the Humber  142.26

Source: RAC Fuel Watch

RAC Fuel Watch data shows the price of unleaded has increased by 28p a litre in a year from 114.5p in October 2020, adding £15 to the cost of filling up a 55-litre family car (£63 to £78.61).

The hike has been driven primarily by the oil price doubling from around $40 a barrel a year ago to $86 now, with some analysts predicting further rises. 

The big question now is: where will it stop and what price will petrol hit?" Simon Williams, RAC

Howard Cox, founder of the FairFuelUK campaign, said that average pump prices will get close to 150p-per-litre by the end of 2021 if oil goes above $90 and near to $100, and that it was “likely” it would hit 150p in the first quarter of next year. 

The RAC also predicted 150p a litre for petrol could become a reality if oil reaches $100 a barrel. It also expects diesel to rise, but points out that it is still "a little way off its all-time high". 

Commenting on the 142.94p record for petrol, RAC fuel spokesman Simon Williams said: “This is truly a dark day for drivers, and one which we hoped we wouldn’t see again after the high prices of April 2012. This will hurt many household budgets and no doubt have knock-on implications for the wider economy.

Oil Prices

“The big question now is: where will it stop and what price will petrol hit? If oil gets to $100 a barrel, we could very easily see the average price climb to 150p a litre.

“Even though many people aren’t driving as much as they have in the past due to the pandemic, drivers tell us they are just as reliant on their cars, and many simply don’t have a choice but to drive. Those on lower incomes who have to drive to work will seriously struggle to find the extra money for the petrol they so badly need.”

The RAC said that while the jump in the price of oil is the main reason for the new record pump price it is not the only factor. September’s switch to greener E10 petrol has also played a part, as has the margin retailers are taking on every litre sold which is now greater than it was prior to the start of the pandemic.

On 1 September the bio content of unleaded increased from five per cent ethanol to 10 per cent, and as ethanol is more expensive than petrol, it added around a penny a litre to the cost on the forecourt. The bio element of a litre now accounts for 8.5p of the cost prior to VAT in comparison to the pure petrol cost which equates to around 41p. This could easily rise still further as the price of ethanol has gone up by 52 per cent since E10 was introduced.

Fuel _pump

Duty at 57.95p a litre still exceeds the combined bio and petrol components which amount to around 50p. VAT currently equates to nearly 24p, but this is applied on top of all other elements of the petrol price including duty and retailer margin.

Since April 2020 retailers have increased their average margin on a litre by 2p from around 5.5p to 7.5p a litre. With volumes sold at the pumps plummeting during the first UK lockdown and remaining lower subsequently retailers, particularly the smaller independent ones, are trying to balance the books.

What makes up the cost of a litre of unleaded?

The cost of a litre of petrol in pence per litre

Pence per litre

Cost of oil

41.79

Bio content (10%) - E10

9.21

Delivery & oil company

1.70

Retailer margin

8.59

Fuel duty

57.95

VAT

23.69

Retail price

142.94

Tax cost

81.64

Tax as % of average retail price

57%

Source: RAC

Calls for Government action 

The RAC urged the Government to “help ease the burden at the pumps” by temporarily reducing VAT and for the biggest retailers to bring the amount they make on every litre of petrol back down to the level it was prior to the pandemic.

The Budget tomorrow (27 October) gives the Government the opportunity to do something, with Chancellor Rishi Sunak tipped to freeze fuel duty again. If he does, it will be the twelfth year in a row. 

 

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