The price of petrol and diesel has reached record highs in the UK. Currently, petrol costs an average of 148.02p per litre and diesel has hit a high of 151.57p*, a huge increase from prices last year. In a recent survey by the AA, it was reported that 43% of its members are cutting back on the amount they use their car due to the high fuel prices. But why are the prices rising so high and how can drivers save money on their fuel?
What factors can influence price?
Fuel prices are determined by the price of crude oil which is influenced by a whole range of external factors. This means that prices often fluctuate within a short period of time and is part of the reason why the current fuel prices are so high. However, petrol retailers don’t always adapt their prices immediately when wholesale energy prices move and so for customers, the cost of fuel remains high. Petrol retailers therefore can influence how much they charge customers for their fuel.
Recently the RAC has accused petrol retailers of keeping prices unnecessarily high and taking extra profits even after wholesale prices dropped. In addition, drivers are paying more money for fuel since the introduction of E10 petrol last year. This fuel has a 10% bioethanol mix which helps to reduce greenhouse gas emissions, but this has caused the price to increase. Furthermore, the energy content of the fuel has decreased, so motorists need to buy more litres of fuel.
The Organisation of Petroleum Exporting Countries (OPEC) plays a dominant role within the oil market. Its oil-producing member nations work together to determine prices by boosting or reducing crude oil production. This helps to avoid fluctuations that might affect the economies of both producing and purchasing countries. This means that if OPEC decides to restrict the supply then the price of fuel in the UK will rise. However, the expansion of the American fracking industry has led to OPEC’s influence declining over the last decade.
The price of fuel often changes quickly in response to global events and fluctuations in the world’s markets. This was seen during the outbreak of Covid 19 when demand for fuel decreased significantly and so the prices were dropped. With many of the Covid 19 restrictions now being lifted, levels of demand have once again been rising. However, suppliers have not always been immediately able to meet the new demand and this situation was worsened by the HGV driver shortage last year. This has caused the price of crude oil, and products derived from it, to rise.
Wars can have a significant impact on the price of fuel. With the ongoing tensions between Russia, Ukraine and the West, the cost of filling up vehicles is beginning to rise again. As the world’s third-largest oil producer, Russia accounts for more than 10% of global output. A conflict involving Russia could therefore mean a significant reduction in the flow of oil to international markets, affecting the price of fuel in the UK. There could be further price increases if Russia imposes sanctions on the West, preventing us from exporting fuel, as demand would quickly outstrip supply.
There is a history of conflict impacting fuel prices, particularly when a prominent oil-producing region is involved. After the Gulf War, oil prices initially soared, hugely impacting some industries. However, as shipments came in from other producers and world oil demand lagged, prices began to fall. It’s likely that we’ll see a similar scenario in the UK over the next couple of months, provided that the tensions in Russia and Ukraine do not escalate.
Who’s affected the most?
The cost of oil has risen to nearly $100 a barrel, the highest level it’s been since 2014, and this is having a huge impact on drivers in the UK. Those that are dependent on their vehicles for work, such as HGV drivers, are already struggling with the increased cost of living and so are the most affected by rising fuel prices. Drivers of diesel vehicles will also be more significantly affected as the cost of diesel reaches a new record high. Taxi drivers are another demographic that are struggling with the rising fuel costs as they’re frequently driving for work. Those that work in the city centre are being hit the hardest as fuel prices are already higher in these locations. As a result, many taxi companies are increasing their fares in order to compensate for the rising fuel costs and inflation.
How can I save on fuel?
Although fuel prices have been rising, businesses can take steps to save money on fuel costs. Changing the way that you drive can help to improve fuel consumption. It’s recommended that you drive steady and slower, avoid idling, drive in a higher gear, and take an advanced driving course as this will allow you to drive more effectively and in a more economical way. Drivers that are struggling with increasing fuel costs could consider making the switch to electric. Although the price of an electric vehicle is higher, the running costs, including charging and maintenance, can be almost half that of a similar petrol or diesel model.
According to New Automotive, the average motorist could save £700 a year in fuel costs by investing in an electric vehicle which would be hugely beneficial for drivers looking to save money on fuel. Electric vehicles are therefore becoming an increasingly viable option for businesses. However, it’s worth evaluating the infrastructure both locally and nationally, as, despite the number of charging points increasing substantially over the last few years, business fleets that regularly drive long distances may still struggle with locating a suitable charger and may face increased journey times.
Our fuel cards can provide savings on fuel, particularly if you choose one of our fixed weekly priced cards. In addition, our free online account management system provides detailed reports on your fuel cards’ activity. This allows businesses to monitor fuel consumption and driver performance. These analytics can then be used to help reduce fuel usage, saving you money. To find out more about how our fuel cards can benefit your business then get in touch with a member of our team today.
*Prices accurate at time of writing
David JamesDavid has worked in the fuel card industry since 2008. His financial insights have been featured in various publications, such as The Sun, the Daily Express and The Yorkshire Times where he provides money-saving tips for motorists. David is passionate about charity work and regularly raises money through running events, including the London Marathon and the Leeds Abbey Dash.