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The price of fuel in the UK is largely determined by the price of crude oil and the exchange rate of the pound against the US dollar, as oil is traded in dollars. In recent years, the UK government has frozen fuel duty at 57.95 pence per litre, with the rate cut to 52.95 pence per litre in 2022 due to the rapid increase in fuel prices caused by the Russian invasion of Ukraine. The price of fuel varies across the UK, with diesel generally being more expensive than petrol or gasoline. As of January 6, 2025, the average price of ultra-low-sulphur unleaded petrol in the UK was 136.6 pence per litre, while diesel averaged 143.3 pence per litre.
| Characteristics | Values |
|---|---|
| Date | 28 July 2025 |
| Average gasoline price | £1.31 per litre |
| Minimum gasoline price | £1.01 per litre |
| Maximum gasoline price | £1.92 per litre |
| Average unleaded petrol price | 136.6 pence per litre |
| Average diesel price | 143.3 pence per litre |
| Fuel duty | 52.95 pence per litre |
| VAT | 20% |
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What You'll Learn
Fuel duty and VAT
The price of fuel in the UK is affected by various factors, including the price of oil, the strength of Sterling against the US dollar, and taxes such as fuel duty and VAT. Fuel duty is a tax levied by the government on every litre of fuel sold, regardless of whether it is petrol or diesel. It is included in the pump price and has been frozen at 57.95p per litre in recent years. Following the Russian invasion of Ukraine in 2022, which caused fuel prices to soar, the duty rate was cut to 52.95p. This rate has been maintained in subsequent budgets and remains in place as of Spring 2025.
Fuel duty is a significant source of revenue for the government, expected to raise £24.4 billion in 2025-26, equivalent to £850 per household. The rate varies depending on the type of fuel, with standard petrol and diesel incurring a duty of 52.95 pence per litre, while liquefied petroleum gas is charged at 28.88 pence per kilogram. Natural gas used as vehicle fuel is taxed at 22.57 pence per kilogram, and 'fuel oil' burned in a furnace or used for heating is taxed at 9.78 pence per litre.
VAT (Value Added Tax) is also applied to fuel purchases. It is charged at 20% on the pre-tax price and an additional 10.59p on the fuel duty amount. For example, the pump price of a litre of petrol includes the pre-tax price, plus 52.95p for fuel duty, 20% VAT on the pre-tax price, and 10.59p VAT on the fuel duty. VAT is applied to the total value, including any excise duty, for road fuel gases and hydrocarbon oils.
The combination of fuel duty and VAT can make up a significant portion of the price of fuel. In 2022, when average petrol and diesel prices reached record highs, tax to the UK government represented approximately 43-44% of the total price paid by drivers. While fuel duty rates have been frozen or temporarily reduced in recent years, the impact of inflation has resulted in a decline in the real value of the duty over time.
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Pump price variations
One significant factor is the price of crude oil, which serves as a broad indicator of changes in finished product prices. The strength of the Sterling compared to the US dollar also comes into play since oil is traded in dollars. When the price of oil falls, pump prices may not decrease proportionately due to the fixed costs of tax, including fuel duty and Value Added Tax (VAT), which constitute a significant portion of the pump price. Additionally, the government's revenue from VAT increases when fuel prices are higher.
The wholesale price of petrol and diesel is another critical factor in pump price variations. Retailers have the flexibility to reflect savings from wholesale price reductions as often or infrequently as they choose. However, the retail fuel market is largely influenced by supermarkets, which, despite having a smaller number of forecourts, account for a substantial proportion of total fuel sales. Consequently, their pricing decisions can significantly impact pump prices across the country.
The frequency with which retailers purchase fuel also affects pump prices. Retailers who utilise larger volumes of fuel tend to buy more frequently and are therefore better positioned to adjust their prices quickly. This dynamic contributes to the common perception that fuel prices "go up like a rocket but fall like a feather."
To promote transparency and enable customers to make informed choices, fuel retailers are encouraged to report their prices daily on their websites and provide this information to the Competition and Markets Authority (CMA). Initiatives like RAC's Fuel Watch also play a role in monitoring pump prices and wholesale prices, ensuring that retailers charge fair prices and pass on savings to drivers when wholesale prices dip.
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Cheapest filling stations
Fuel prices in the UK can vary a lot, even over a short distance. For example, in March 2024, an ITV investigation found a 27p per litre difference between the prices of petrol at two stations that were a short drive apart. The price of fuel is affected by factors such as the global price of crude oil, the strength of Sterling compared to the US dollar, and retailers' willingness.
To find the cheapest filling stations, there are several apps available that can help you compare prices and locate the cheapest fuel near you. These include:
- MyRAC: This app allows you to locate the cheapest fuel that's close to you and provides maps that show how prices vary across the UK. It also has a Fuel Finder feature that can help you find the cheapest forecourts.
- PetrolPrices: This app allows you to compare fuel prices across the UK and filter by brand or fuel type. It has over 2.75 million UK users and can help you save money on your fuel bills.
- Roadtrip: This app helps you calculate the cost of petrol for your trip and find cheap petrol stations along your route. It provides accurate price estimates and is available for free.
In addition to using these apps, it's worth looking beyond supermarkets as some independent retailers can also be cost-competitive. Checking cashback offers from credit card companies can also help offset higher fuel prices.
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Fuel price monitoring
Fuel prices in the UK are affected by various factors, including the price of crude oil, refining and production costs, taxes, and the strength of the pound relative to the US dollar. While fuel prices are not regulated by a specific monitoring body, initiatives like RAC's Fuel Watch help ensure that retailers charge fair prices by monitoring wholesale and pump prices daily.
The UK government levies fuel duty and VAT on fuel, which can make up a significant portion of the price per litre. In recent years, the fuel duty rate has been frozen at 57.95 pence per litre, with a cut to 52.95 pence in 2022 due to rapid fuel price increases caused by the Russian invasion of Ukraine. The duty rate is set to remain at 52.95 pence per litre from Spring 2025.
Motorists can use tools like the RAC's Fuel Finder feature to locate the cheapest filling stations and save money on fuel costs. The Fuel Cost Calculator by Fleet News also helps budget for fuel expenses by considering factors such as fuel type, mileage, and vehicle model.
As of January 6, 2025, the average price of ultra-low sulfur unleaded petrol in the UK was 136.6 pence per litre, while diesel averaged 143.3 pence per litre. These prices can vary across regions and retailers, with large supermarkets often offering lower prices. The UK is among the European countries with the highest petrol prices, influenced by import costs and taxes.
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Fuel cost calculators
In the UK, fuel prices can vary depending on location. The RAC's Fuel Watch initiative monitors wholesale and pump prices daily to ensure retailers are charging a fair price. The price of fuel is influenced by various factors, including tax, the strength of the pound against the US dollar, and the global oil price, which is constantly fluctuating. Political events and relationships between countries can also impact fuel prices. For example, the Russian invasion of Ukraine caused fuel prices to increase rapidly.
To save money on fuel, it is recommended to drive efficiently, locate the cheapest filling stations, and consider cashback offers from credit card companies. Additionally, carpooling, choosing smaller cars, and selecting suitable engine sizes can help reduce fuel consumption and costs.
Using a fuel cost calculator can help individuals and businesses budget for fuel expenses and make informed decisions about their transportation choices. By inputting relevant data, users can estimate fuel costs for specific journeys or monthly usage, enabling better financial planning and potential cost savings. These calculators are particularly useful in regions where fuel prices are volatile due to various economic and political factors.
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Frequently asked questions
The price of fuel is typically given per litre in the UK, and as of January 6, 2025, the average price of unleaded petrol was 136.6 pence per litre. To convert this to UK gallons, we can use the conversion rate of 1 litre = 0.2199692483 gallon. This means that 136.6 pence per litre is equivalent to approximately 30.05 pence per UK gallon.
The UK adopted the metric system in 1965, which uses litres as a unit of measurement. This system is used across Europe and around the world, whereas the UK gallon is not commonly used outside of the UK and the US.
The UK often has some of the highest petrol prices in Europe, alongside other large European car markets such as France and Germany. This is due to the costs of importing the raw or finished products, as well as taxes and levies.
The price of fuel in the UK includes fuel duty and VAT. Fuel duty is a tax charged by the government on every litre of fuel sold, and VAT is charged on the total price, including the fuel duty.
Fuel duties have been frozen at a rate of 57.95 pence per litre in recent years. However, in 2022, the duty was cut to 52.95 pence per litre following the Russian invasion of Ukraine, which caused fuel prices to increase rapidly.
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