Petrol prices look set to increase at the pump in the coming weeks as wholesale prices begin to creep back up.
Data from the RAC confirmed that January was the third month in succession that fuel prices had dropped. 2022 was a record year for fuel price volatility, and prices for petrol approached £2 per litre in the summer, in large part due to the West’s reliance on Russia for oil and the latter’s invasion of Ukraine.
Towards the end of the year, despite cuts in global oil production enforced by OPEC+, fuel prices at the pump dropped as wholesale prices fell.
The RAC reports that UK motorists have not paid as little as they are now paying for fuel since February 2022, before Russia began its full-scale invasion of Ukraine.
However, the period of falling prices seems set to end, as wholesale prices are now back on the rise.
Wholesale petrol prices rose by 2p per litre in January, and for diesel it was a rise of 3p per litre. As yet, the major supermarkets in the UK have yet to increase their forecourt prices in-line with the wholesale prices.
Demand for oil is also set to increase as China is beginning to open up again after the ending of its ‘Zero Covid’ policy. As a result, oil - which is already trading at over $80 per barrel - is predicted to rise to over $90 per barrel.
The RAC predicts a rise of average petrol prices to around 155p per litre, and the price could increase further in the UK is the Chancellor confirms the rumoured increase in fuel duty in his spring budget next month.
RAC 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.
“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.
“For the time being, however, the big four supermarkets – which dominate UK fuel retailing – are yet to raise their prices in response to the slight rise in wholesale costs which is encouraging for drivers around the country. We urge them to continue to stand firm and only increase pump prices if the wholesale price really forces their hand.
“The three months of significantly lower wholesale prices starting from mid-October have highlighted some interesting regional and local pricing disparities, often due to smaller retailers passing on savings in the wholesale cost of fuel to their customers while their supermarket rivals have been reluctant to do the same. So, in areas where there is little competition from lower-cost retailers, drivers have sadly often seen far higher pump prices.
“Looking around the UK at the end of January we can see forecourt prices were generally cheaper in the North West, North East, Wales and Scotland, while Northern Ireland – for a number of reasons – remains an anomaly being 4p cheaper than the UK average.”
