Petrol and diesel prices in the UK - data and insight from RAC Fuel Watch

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Pump prices change when there are significant and sustained increases or reductions in the wholesale price of petrol or diesel. Retailers can reflect these savings as often or as infrequently as they like.

In reality though the retail fuel market tends to be led by the supermarkets, as despite only having around 16% of UK forecourts they are responsible for some 44% of total fuel sales, so we often see widespread cuts being passed on at the pumps at the same time.

The other factor which affects when forecourt prices are changed is how frequently retailers buy their fuel. Retailers who use greater volumes tend to buy more frequently and are therefore tend to alter their prices more quickly.

The price of petrol was at its highest in April 2012, when on average a litre cost 142.48p. In the same month, diesel hit a record high of 147.93p on average.

There is a limit to how low prices can go as tax – fuel duty at 57.95p a litre and VAT on the total price, including fuel duty – make up the lion’s share of the price of a litre. Even if the fuel was given away and the retailers didn’t take a margin, the price of a litre would still be 70p per litre – 57.95p duty, plus 20% VAT – 11.5p.

This high level of tax affects the price of a litre of fuel significantly. And, when the price of oil is falling it can also create a perception that pump prices are not reducing as much as they should because the lower the pump prices falls, the greater the percentage of tax.

The total (retail) price paid at the pump includes a significant amount of tax – currently 57.95p per litre in fuel duty and 20% VAT. See the pie charts below:

But the total proportion of tax we pay to the Treasury varies depending on the pump price. For instance, with fuel at £1.20 a litre at the pumps, 65% of the cost is tax. But at £1 a litre it rises to 75%, meaning 75p in every litre sold goes to the Treasury.

Fuel duty raises more than £28bn a year, which together with VAT charged on fuel, vehicle tax and ‘showroom’ tax totals, means motorists contribute more than £40bn a year to the Government’s coffers.

The chart below shows how fuel sales have changed over the years, and how much fuel duty and VAT are raised from these sales (choose the chart you’d like to view from the drop-down menu):

The UK Petroleum Industry Association reports that each day, 46m litres of petrol and 74m litres of diesel are sold in the UK.

According to HM Revenue and Customs data for 2019, 44bn litres of fuel were used by drivers – 28bn litres of diesel and 16bn litres of petrol.

This is a term often applied to fuel prices to describe how they always appear to rise faster than they ever come down, i.e. they go up like a rocket but fall like a feather.

The RAC believes retailers have a reasonable record of passing on reductions in the wholesale price of fuel to motorists at the pump, but there are occasions where we think this could be carried out more quickly.

For instance, retailers often seem to take more encouraging to reduce their prices when oil prices are falling than they do when oil goes the other way.

Of course, the longer they hold off cutting pump prices when oil’s coming down, the better it is for their margins, and the reverse is also true: when the cost of a barrel of oil rises, the more they stand to lose if they don’t raise the forecourt price quickly.

Prices can vary dramatically from region to region, and even in towns that are only a few miles apart.

Sometimes fuel can even be cheaper in a more rural location than in an urban one.

Local retail dynamics play a big part. Local prices are very often driven by the presence of supermarkets keen to compete on price or an independent forecourt retailer that is determined to offer the cheapest fuel. If local supermarkets selling fuel don’t compete strongly on price this can in fact lead to motorists paying more.

While delivery costs tend not to play too large a part in the overall pump price, excessive distances from fuel terminals can have a significant effect on prices in rural locations.

It is for this reason the Government took action to help some of the country’s most rural communities where the price of fuel is deemed to be negatively affecting residents. In 2012 it introduced a 5p rural fuel duty discount in the Inner and Outer Hebrides, the Northern Isles, and the Isles of Scilly. In March 2015 this was extended to 10 rural mainland communities.

According to the UK Petroleum Industry Association (UKPIA), there are 8,406 filling stations as of 2018.

Please have a look at our page on petrol and diesel prices across Europe.

We have a number of other guides that may help you, including:

• What affects the price of fuel?
• Petrol and diesel prices across Europe
• Understanding how many miles you have left when the fuel light comes on
• Does old fuel go off?
• Can I store fuel at home?