Sylvie Willis
Fuel prices in the UK have been a significant concern for drivers, with taxes and global events influencing the cost of petrol and diesel. As of March 2025, the average cost of unleaded petrol was 137.39 pence per litre, while diesel averaged 144.14 pence per litre. However, prices vary across the UK, with the Isle of Wight being the most expensive region. The UK's fuel prices are impacted by various factors, including the strength of the pound against the US dollar, global conflicts, and government taxes. Monitoring initiatives like RAC's Fuel Watch aim to ensure fair pricing at forecourts, while also helping drivers find the most cost-effective options.
| Characteristics | Values |
|---|---|
| Date | 23/07/2025 |
| Average unleaded petrol price | 137.39p per litre |
| Average diesel price | 144.14p per litre |
| Fuel duty rate | 52.95p per litre |
| Tax | VAT |
| Cheapest places to buy fuel | Venezuela, Kuwait, Egypt |
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What You'll Learn
Fuel duty and VAT
Fuel duty is a tax levied by the UK government on every litre of fuel sold, whether petrol, diesel, or other types of fuel. The revenue generated from fuel duties is a significant source of income for the government, expected to raise £24.4 billion in 2025-26, which is equivalent to £850 per household. The duty is charged per unit of fuel purchased and included in the price paid at the pump. The standard rate of fuel duty has been frozen at 57.95 pence per litre since 2011-12, with a temporary 5 pence cut introduced in 2022-23 following the Russia-Ukraine war, resulting in a new rate of 52.95 pence per litre. This rate was further extended until Spring 2025.
The rate of fuel duty varies depending on the type of fuel. For liquefied petroleum gas, the rate is 28.88 pence per kilogram, while natural gas used as vehicle fuel is charged at 22.57 pence per kilogram. 'Fuel oil' burned in a furnace or used for heating is taxed at 9.78 pence per litre. These rates have remained largely unchanged over the years, although the real value of the duty declines over time due to inflation.
VAT (Value Added Tax) is applied on top of the fuel duty. For example, the pump price of petrol includes the pre-tax price, the fuel duty, 20% VAT on the pre-tax price, and an additional 10.59 pence for VAT at 20% on the fuel duty. VAT is charged on the total value, including any excise duty, for road fuel gases and hydrocarbon oils. However, fuel supplied for use in foreign-going ships or aircraft is zero-rated, and a reduced VAT rate applies to solid fuels like coal, coke, wood, peat, or charcoal used for domestic purposes.
The combination of fuel duty and VAT significantly impacts the price of fuel in the UK. Even if fuel retailers did not take any margin, the price per litre would still include these taxes. When oil prices are falling, pump prices may not decrease proportionally due to the fixed tax component. Conversely, when fuel prices are higher, the government collects more VAT revenue.
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$15.8 $16.95
Pump prices
The wholesale price of oil is a major factor in determining pump prices. When oil prices are high, petrol and diesel prices at UK forecourts tend to increase, and vice versa. However, there can be a perception that pump prices do not decrease as much as they should when oil prices fall, due to the high level of tax included in the pump price. This tax includes fuel duty, which has been frozen in recent years at 57.95p per litre, and VAT, which is charged on the total price. The government's revenue from VAT is higher when fuel prices are higher, and the percentage of tax makes up a greater proportion of the pump price when prices are lower.
The strength of sterling against the US dollar also impacts pump prices, as oil is traded in US dollars. A weaker pound can lead to higher pump prices, while a stronger pound may result in lower prices. Additionally, the retailer's margin and the cost of transportation can affect pump prices, and these costs may vary between different retailers and regions.
To ensure you are paying a fair price for fuel, it is recommended to check initiatives like RAC Fuel Watch, which monitors wholesale and pump prices daily and calls on retailers to pass on savings to drivers. Apps like myRAC can help you find the cheapest forecourts in your area, and it is worth considering that independent retailers can sometimes offer competitive prices compared to supermarkets. Small detours to visit cheaper forecourts can lead to significant savings over time, and cashback offers from credit card companies can also reduce fuel costs.
As of March 2025, the average pump prices in the UK were 137.39p per litre for unleaded petrol and 144.14p per litre for diesel, including VAT. However, prices can vary across different regions, with the Isle of Wight being the most expensive, peaking at 150.6p per litre for petrol.
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Wholesale prices
The price of crude oil is a significant factor in determining wholesale fuel prices. Fluctuations in the global crude oil price, due to changes in supply and demand, can lead to variations in wholesale fuel costs. For example, in April 2025, a £10-per-barrel drop in the wholesale cost of Brent crude oil resulted in lower fuel prices for UK consumers. Conversely, in 2022, prices briefly surged beyond $120 per barrel, contributing to higher wholesale fuel prices.
The pound-to-dollar exchange rate also plays a crucial role in influencing wholesale prices. Since refined fuel is traded in US dollars, a weak pound can lead to higher wholesale fuel prices in the UK. Additionally, oil refinery production and capacity can impact wholesale costs. Changes in refinery operations or fluctuations in their production capacity can be reflected in the wholesale price of fuel.
Retailers then set the final fuel price at the pump based on the wholesale price they have paid, along with other factors such as their retailer margin and fuel duty. While retailers typically pass on the increased costs to consumers when wholesale prices rise, they may be reluctant to reduce prices when wholesale costs decrease. This dynamic can result in consumers experiencing more frequent price increases than decreases at the pump.
It is worth noting that the UK government also plays a significant role in influencing fuel prices. The government controls the fuel duty, which is currently set at 52.95 pence per litre, and the standard VAT rate, which stands at 20%. These taxes represent a substantial portion of the total retail price paid by consumers at the pump.
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Cheapest filling stations
Fuel prices in the UK can vary a lot, even over a short distance. There are a few ways to find the cheapest filling stations near you.
Firstly, you can use an app. The myRAC app has a Fuel Finder feature that can help you locate the cheapest fuel close to you. The PetrolPrices app also allows you to compare and find the latest rates for petrol and diesel. The Roadtrip app is another option that can help you find the cheapest petrol stations nearby.
Websites such as Fleet News and RAC Drive also provide information on the latest fuel prices. RAC Drive monitors wholesale prices and pump prices daily, covering the UK's big four supermarkets (Asda, Costco, Tesco, Sainsbury's, and Morrisons), plus many other brands.
It is also worth noting that supermarkets dominate fuel sales, despite only operating around a fifth of the forecourts. Independents operate around two-thirds of the country's filling stations but are only responsible for just over a third of all fuel sold.
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International comparison
The UK typically has some of the highest petrol prices globally, alongside other large European car markets such as France and Germany. As of January 6, 2025, the average price of ultra-low-sulfur unleaded petrol in the UK was 136.6 pence per litre, compared to 143.3 pence per litre for diesel.
In comparison, Hong Kong has been recognised as having the most expensive petrol in the world, at around $2.96 per litre, closely followed by Iceland at $2.24 per litre, and Monaco at $2.22 per litre.
The UK's fuel prices are also higher than those in the United States, where the average price of gasoline was $3.29 per gallon (roughly 86 cents per litre) as of June 2023.
On the other hand, fuel prices in the UK are generally lower than those in many other European countries. Between mid-2020 and mid-2021, petrol and diesel were more expensive in the UK than in France, but since the start of 2023, prices have been higher in France. Diesel in many other countries is also typically cheaper than in the UK due to lower tax rates.
The cheapest petrol prices globally can be found in Venezuela, where petrol costs just $0.02 per litre, followed by Libya at $0.40 per litre, and Iran at $0.50 per litre. These countries are major oil-producing nations, so motor fuels tend to be much cheaper.
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Frequently asked questions
As of March 2025, unleaded petrol in the UK costs an average of 137.39p per litre, including VAT. Diesel costs an average of 144.14p per litre, including VAT.
In recent years, the fuel duty rate has been frozen at 57.95p per litre. Following the Russian invasion of Ukraine, the rate was cut to 52.95p in 2022. This rate will remain in place from Spring 2025. VAT is also charged on the total price of fuel.
Generally, higher oil prices lead to higher petrol and diesel prices at UK forecourts. Conversely, lower oil prices should theoretically lead to cheaper pump prices.
The Isle of Wight is the most expensive region in the UK to purchase petrol, with prices peaking at 150.6p per litre.
