What affects the price of fuel?

This page explains why we pay what we do for fuel in the UK. 

If you are looking for the latest petrol and diesel prices, including at supermarkets and motorway service areas, please visit the RAC Fuel Watch page.

Background to petrol and diesel prices

The price we pay for fuel at the pumps is affected by a variety of factors, including:

  • the global price of crude oil - the oil price chart below shows how this is changing
  • supply and demand for crude oil
  • refinery production and capacity
  • the pound to dollar exchange rate, as refined fuel is sold in US dollars
  • distribution costs
  • the margin fuel retailers decide to take
  • fuel duty charged by the Government
  • VAT charged at the end of every forecourt fuel transaction

While some of these stay largely static - such as the fuel duty rate and VAT - others such as the oil price and dollar to sterling exchange rate can be very volatile. These affect the wholesale price of fuel - the price retailers pay to buy the fuel in before they sell it at forecourts, and explain why prices rise and fall.

While fuel retailers base pump prices on the wholesale cost of petrol and diesel, there is typically a two-week ‘lag’ between pump prices moving to reflect any change in the wholesale price, as this is the time it takes for fuel to work its way through the supply chain to the forecourt.

The charts below help illustrate how oil, and in turn wholesale fuel prices, affect what we're charged at the pumps.

In graphics: Track oil and wholesale fuel prices

These charts help explain how UK pump prices are calculated.

The first shows how the cost of Brent crude oil has changed over the years. Generally speaking, higher oil prices lead to higher petrol and diesel prices at UK forecourts. 

The second and third charts show how wholesale prices have changed, and how these correlate to the prices charged at the pumps.

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