Sylvie Willis
Fuel prices in the UK have been on an upward trajectory in recent years, with the cost of a gallon of fuel becoming an increasingly important topic of discussion for motorists. The price of fuel is influenced by various factors, including the global price of crude oil, taxes, and production costs, and these dynamic elements contribute to fluctuations in pricing. With fuel duty and VAT constituting a significant portion of fuel costs, the UK often finds itself among the countries with the highest petrol and diesel prices in Europe. As fuel prices continue to be a concern for drivers, understanding the factors that influence pricing and exploring ways to mitigate costs becomes essential for both individuals and businesses.
| Characteristics | Values |
|---|---|
| Average fuel price in the UK | 142.2 p/litre |
| Average gasoline price from 2015 to 2025 | GBP 1.30 per litre |
| Maximum gasoline price in 2022 | GBP 1.92 per litre |
| Average petrol price in 2022 | 191.5 p per litre |
| Average diesel price in 2022 | 199.09 p per litre |
| Percentage of cost that is tax at 120p per litre | 65% |
| Percentage of cost that is tax at GBP 1 per litre | 75% |
| Annual revenue from fuel duty | Over GBP 26 billion |
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What You'll Learn
Fuel prices and inflation
In the UK, the Consumer Prices Index (CPI) is used to measure inflation, and it includes fuel prices as a significant component. The Office for National Statistics (ONS) regularly reports on the CPI and has noted that falling fuel prices are often the main reason for a decrease in the headline inflation rate.
The dynamic association between fuel prices and inflation is complex and can be influenced by various factors. For instance, the UK's inflation response to oil and gas price changes is asymmetric. This means that while increases in oil and gas prices can contribute to higher inflation, the impact of a decrease in prices may not always result in a proportional reduction in inflation.
Additionally, the retail fuel market in the UK is largely led by supermarkets. While they account for only about 16% of UK forecourts, they are responsible for approximately 44% of total fuel sales. This gives them significant influence over the prices that consumers pay at the pump.
The RAC, an organisation that monitors fuel prices in the UK, has observed a pattern called "rocket and feather" pricing. This refers to the tendency for retailers to be quicker to raise their prices when the cost of fuel increases but slower to lower prices when costs decrease. This behaviour can impact the overall inflation rate, as higher fuel prices can lead to higher transportation costs for goods and services, ultimately contributing to broader price increases across the economy.
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Fuel tax
In the UK, the duty rate for road fuels such as unleaded petrol, diesel, biodiesel, and bioethanol was £0.5295 per litre (£2.41 per imperial gallon or £2.00 per US gallon) as of March 23, 2022. Value-added tax (VAT) at 20% is also charged on the price of the fuel and the duty. An additional vehicle excise duty, based on a vehicle's theoretical CO2 production per kilometre, is levied regardless of fuel consumption. Red diesel, used by farmers and construction vehicles, has a lower tax rate of £0.1133 per litre (£0.515 per imperial gallon or £0.429 per US gallon).
Fuel duty in the UK has been frozen since 2011, except for a temporary 5-pence cut in the 2022/23 tax year. This temporary cut was extended for another year in the 2023 budget speech by British finance minister Rachel Reeves, who cited global uncertainty and a high cost of living as reasons for the decision.
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Regional price variation
Fuel prices in the UK can vary significantly from region to region, and even between towns that are just a few miles apart. Several tools are available online to help UK residents compare petrol and diesel prices and locate the cheapest fuel in their area. For instance, Fleet News has teamed up with Allstar to provide a UK fuel prices locator, which allows users to compare prices by entering their pence per litre or looking up their vehicle's mpg from a dataset.
The RAC's Fuel Watch initiative also helps ensure that retailers charge a fair price across the UK's forecourts. They monitor wholesale prices and pump prices daily, covering supermarkets and other independent forecourts. While the RAC previously believed that retailers passed on reductions in wholesale fuel prices to motorists in a timely manner, they now acknowledge that there is room for improvement. Retailers may delay reducing their prices when oil prices fall to maximise their margins.
The UK's fuel prices are influenced by various factors, including inflation and the Consumer Prices Index (CPI). When wholesale prices decrease, the RAC calls on retailers to pass on the savings to drivers. However, the retail fuel market is largely led by supermarkets, which control around 44% of total fuel sales. As a result, widespread cuts are often passed on simultaneously at the pumps.
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Average fuel prices
Fuel prices in the UK have been steadily rising, with average petrol and diesel prices hitting record highs during the summer of 2022. The highest average prices were recorded as 191.5p per litre of petrol and 199.09p per litre of diesel. However, some forecourts charged substantially higher prices than these averages.
The UK's fuel prices are monitored by Fuel Watch, an initiative by RAC that ensures retailers charge fair prices. While the RAC noted that retailers passed on reductions in wholesale fuel prices to motorists before 2020, they also observed a delay in reducing prices when oil prices fell. The RAC's analysis in January 2023 revealed "rocket and feather" pricing in action.
Fuel prices in the UK vary significantly from region to region and even between towns that are just a few miles apart. The average gasoline price from 2015 to 2025 was £1.30 per litre, with a minimum of £1.01 in February 2016 and a maximum of £1.92 in July 2022.
Supermarket prices for unleaded petrol averaged 142.2 pence per litre, with a gap of 3.1 pence per litre compared to the UK average for unleaded fuel. The cost of fuel also includes various taxes, such as fuel duty and VAT, which contribute significantly to the government's revenue.
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Fuel price calculators
Fuel prices in the UK have been on an upward trajectory, with average petrol and diesel prices hitting record highs during the summer of 2022. The highest average prices were 191.5p per litre of petrol and 199.09p per litre of diesel. These prices vary across the country and are influenced by various factors, including global oil market volatility, exchange rates, supply chain disruptions, and taxes.
To help individuals and businesses manage fuel expenses, several fuel price calculators are available online:
- Fleet News Fuel Cost Calculator: This calculator helps you estimate the cost of fuel for your vehicle by taking into account factors such as fuel type, mileage, and mpg rate. It is particularly useful for budgeting for monthly or annual fuel costs and identifying potential savings.
- Petrol-Calculator.co.uk: This website offers a petrol calculator that determines the amount of fuel required for a journey. It requires inputting the distance in miles and the estimated MPG of your vehicle. It also provides a conversion tool between litres per 100km and miles per gallon.
- CalculatorMPG.co.uk: This fuel cost calculator assists in calculating the fuel expenses for a journey. It provides insights into mileage and fuel consumption, helping individuals and businesses optimise their fuel efficiency and budgeting.
- Fuel-Economy.co.uk: While not specifically mentioned as a cost calculator, this website offers tips for car drivers to improve their fuel efficiency and achieve better MPG performance.
These fuel price calculators can be valuable tools for planning travel routes, choosing fuel-efficient vehicles, and making cost-saving decisions, ultimately contributing to a more sustainable future.
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Frequently asked questions
The cost of fuel in the UK is measured per litre, not per gallon. As of 2022, the price of fuel per litre ranged from £1 to nearly £2.
The UK uses the metric system, which measures litres and millilitres for liquids, whereas gallons are used in the imperial system.
The proportion of tax you pay depends on the pump price. For instance, when fuel is 120p per litre, 65% of the cost is tax, but when it rises to £1 per litre, 75% goes to the Treasury.
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