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Fuel prices in the UK are determined by a multitude of factors, including the wholesale cost of crude oil, currency exchange rates, demand, and taxes. The price of fuel has a significant impact on inflation rates and the cost of living for motorists. With fluctuations in fuel prices, understanding the current costs of petrol and diesel in the UK and how they are calculated is essential for individuals and businesses alike.
| Characteristics | Values |
|---|---|
| Average cost of unleaded petrol in the UK in 2025 | £1.26 per litre |
| Average cost of diesel in the UK in 2025 | £1.40 per litre |
| Average cost of unleaded petrol in the UK in 2023 | £1.40 per litre |
| Average cost of diesel in the UK in 2023 | £1.50 per litre |
| Average cost of filling up a Ford Focus with petrol in September 2024 | £75.82 |
| Average cost of filling up a Ford Focus with diesel in September 2024 | £78.44 |
| Average cost of unleaded petrol in supermarkets in 2024 | 142.2 pence per litre |
| Average cost of diesel in the UK in January 2025 | 142.91 pence per litre |
| Fuel duty in the UK as of 2025 | 52.95 pence per litre |
| VAT rate in the UK | 20% |
| Countries with the highest petrol prices in Europe | The UK, France, and Germany |
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What You'll Learn
Fuel prices vary across the UK
Regional variations in fuel prices can be significant, even between towns that are just a few miles apart. Local retail dynamics, such as the presence of supermarkets or independent retailers, can drive competition and influence prices. In some cases, fuel prices in rural areas may even be lower than in nearby urban centres.
The UK government's fuel duty and VAT rates also contribute to the overall cost of fuel. As of September 2024, the fuel duty was set at 52.95 pence per litre, while VAT stood at 20%. The proportion of tax paid to the Treasury varies depending on the pump price, with higher prices resulting in a larger tax component.
Motorists can use tools like fuel price comparison apps and maps to locate the cheapest fuel options in their area. These resources can help drivers save money by finding the most cost-effective filling stations and taking advantage of savings offered by supermarkets and membership programs. By being mindful of fuel prices and shopping around, drivers can minimise their fuel expenditure.
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The wholesale cost of crude oil
Fuel prices in the UK are influenced by several factors, including the wholesale cost of crude oil, which is traded in US dollars. The wholesale price of crude oil is projected to increase over time, with estimates suggesting a rise from 57 US dollars per barrel in 2020 to 90 US dollars per barrel by 2035 and remaining at this level until 2040. These projections are based on assumptions about economic growth, fossil fuel prices, and policy decisions.
The relationship between oil prices and pump prices is not always straightforward. When the cost of a barrel of oil increases, retailers may delay raising forecourt prices to maximise their margins. Conversely, they may be hesitant to lower pump prices promptly when oil prices decline. This dynamic is known as "rocket and feather" pricing, where price increases are rapid ("rocket"), and price decreases are slower ("feather").
The UK government collects significant revenue from fuel sales through fuel duty and value-added tax (VAT). As of September 2024, fuel duty was set at 52.95 pence per litre, with VAT at 20%. The proportion of tax in the total retail price varies depending on the pump price. For instance, when fuel is 120 pence per litre, 65% of the cost goes to the treasury, but this increases to 75% when fuel reaches £1 per litre.
While the wholesale cost of crude oil is a crucial factor in fuel pricing, it is essential to consider other influences, such as taxes, retailer strategies, and currency exchange rates, to understand the overall fuel cost in the UK. These factors collectively impact the prices that drivers pay at the pump, affecting their spending and, more broadly, inflation levels in the country.
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The impact of taxes and duties
Fuel prices in the UK are largely impacted by taxes and duties. As of September 2024, fuel duty in the UK is set at 52.95 pence per litre, with VAT at 20%. The proportion of tax paid to the Treasury depends on the pump price. For instance, when fuel costs 120 pence per litre, 65% of the cost is tax, but this increases to 75% when fuel costs £1 per litre.
Fuel duty rates have been adjusted over the years. In December 2008, the rate was 50.35 pence per litre, which increased to 52.35 pence in December 2008 and then to 54.19 pence in April 2009. In 2022, the UK government announced a temporary five-pence cut in fuel duty, recognising the challenges posed by global uncertainty and a high cost of living. This resulted in a fuel duty of around 43-44 pence per litre in 2022-23.
The UK has the eighth-highest fuel duty on petrol and the joint-highest fuel duty on diesel when compared to other EU member states. The high fuel duty rates have been criticised for causing economic damage and specific concerns related to local air quality and congestion.
The total retail price of fuel in the UK includes a significant amount of tax. For example, when fuel is priced at 120 pence per litre, as seen in 2022, tax accounts for approximately 65% of the cost. This means that for every litre of fuel purchased, a substantial portion of the payment goes directly to the Treasury.
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How to find the cheapest fuel
The cost of fuel in the UK can vary a lot, even over short distances. There are various factors that influence the price of fuel, including the global price of crude oil, the strength of Sterling against the US dollar, and the willingness of retailers to pass on wholesale savings. Local retail dynamics also play a large part, with prices driven by the presence of supermarkets and independent retailers competing to offer the cheapest fuel.
To find the cheapest fuel in the UK, there are several websites and apps you can use to compare prices and locate the most affordable options near you:
- PetrolPrices.com: This website and mobile app allow you to compare fuel prices across the UK, filter by brand or fuel type, and sort by distance or price. With over 2.75 million UK drivers using it, you could save up to £240 a year.
- RAC Fuel Watch: The RAC provides a Fuel Finder feature within its free myRAC mobile app, helping you locate the cheapest forecourts within a specified distance. You can also check the latest RAC Fuel Watch average price on their website or the myRAC app and aim to pay no more than this when filling up.
- Confused.com: This website provides a handy map to find EV charging points near you, along with petrol and diesel prices.
- Fleet News: In partnership with Allstar, Fleet News offers a UK fuel prices locator to compare prices and find the cheapest petrol or diesel in your area.
Additionally, keep in mind that supermarket petrol stations can offer great value, and some independent retailers can be cost-competitive as well. Even a small detour to a cheaper forecourt can result in significant savings over time. Also, consider cashback offers from credit card companies for spending at filling stations.
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The link between fuel prices and inflation
Fuel prices in the UK vary depending on location. For instance, prices can differ dramatically between regions and even between towns that are just a few miles apart. Local retail dynamics play a large part, with local prices often driven by the presence of supermarkets keen to compete on price or independent retailers determined to offer the cheapest fuel.
As of September 2024, fuel duty in the UK was set at 52.95 pence per litre, and VAT at 20%. The total proportion of tax paid to the Treasury depends on the pump price. For instance, with fuel at 120 pence per litre, 65% of the cost is tax, but at £1 per litre, this rises to 75%. At these prices, tax to the UK government represented around 43-44% of the total price that drivers were paying.
There is a clear link between fuel prices and inflation. Higher oil prices lead to higher petrol and diesel prices at UK forecourts. In turn, higher fuel prices can contribute to higher levels of inflation. The response of inflation to oil price shocks is asymmetric. For example, when oil prices rose from $54 to $144 between January 2007 and June 2008, it caused inflation of 5%. This was quite small compared to the size of the sustained rise in oil prices.
The biggest use of oil is transportation (66%). Therefore, when oil prices rise, all transported goods will be affected by higher transport costs. If producer prices rise due to higher oil prices, it can also lead to knock-on effects, such as workers seeking higher wages to compensate for the higher cost of fuel. Rising oil prices may increase inflation expectations.
However, it is important to note that there are many other factors affecting inflation besides oil prices, such as wage growth, confidence, spare capacity in the economy, and the rate of growth. Additionally, in a competitive market, firms may choose to absorb some of the cost increases rather than passing on the full amount to consumers in the form of higher prices.
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Frequently asked questions
The cost of fuel in the UK varies depending on the type of fuel, location, and retailer. As of March 2025, the average cost of unleaded petrol was 137.39p per litre, while diesel was 144.14p per litre.
Fuel prices in the UK are influenced by a variety of factors, including the wholesale cost of crude oil, currency exchange rates, demand, production levels, retailer margins, and taxes such as fuel duty and VAT.
The UK's fuel prices are comparable to those in other countries and are influenced by global factors such as conflicts, production levels, and demand.
You can use fuel price comparison tools such as RAC Fuel Watch, PetrolPrices.com, or the myRAC app to find the most affordable fuel stations in your locality.
High fuel prices directly affect vehicle owners, increasing their travel expenses and straining their budgets. Industries that rely on transportation and fuel as a primary energy source may also experience higher costs, which can have a ripple effect on the overall economy.
