Higher fuel prices could be ‘new norm’ in 2018

Higher fuel prices could be ‘new norm’ in 2018
Pump price rises are a near inevitability according to the RAC, after oil rose above $70 a barrel for the first time since 2014.

In a start to 2018 few drivers would have wished for, a surge in the wholesale cost of fuel looks set to lead to hikes on the UK’s forecourts, with higher prices likely to become the “new norm” for the year ahead.

The price of both petrol and diesel is already at a four-year-high, averaging £1.21 and £1.24 respectively, data from RAC Fuel Watch shows.

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Only last week the RAC warned that the “good times” of lower fuel prices are likely to be behind us for the time being, noting that at the end of December 2017 a tank of unleaded cost almost £4 more than it did in July.

A litre of petrol has already increased by nearly 5p a litre since the start of November, with diesel up 3p. The cost of filling an average 55-litre family car is now £66.69 for petrol and £68.18 for diesel.

RAC fuel spokesman Simon Williams said he is “fearful that $70 a barrel could become the new norm for 2018”. He went on: “If oil stays at this level, pump price hikes will be almost inevitable.

“With households across the country still feeling the cost of Christmas, this is not the start to 2018 anyone would have wanted. It could also negatively affect business and further fuel inflation.”

The last time the cost of a barrel was valued at over $70 was December 3, 2014, when it stood at $70.22, the RAC confirmed.

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Without a significant strengthening of the pound – which would keep wholesale prices, traded in dollars, in check – the RAC worries that pump prices will rise. Its current two-week forecast shows a fairly static picture but this could change quickly if the oil price remains above $70.

RAC fuel spokesman Simon Williams said: “Oil hitting $70 a barrel is potentially very bad for motorists who are already having to get used to paying 7p a litre more for petrol and 9p more for diesel than they did last July.

“Looking at the global oil picture it seems as if the glut of oil stocks is disappearing due to the production cuts imposed by OPEC along with non-member Russia as the United States’ crude oil inventories have fallen for eight weeks in a row. The US is now producing far more from fracking but this isn’t filling the gap from the OPEC cuts.

“If, however, the US’s fracking production increases substantially there is a hope that the price of oil may fall back and settle at the mid-$60 a barrel mark. This would, of course, be far better news for UK motorists.”

Copyright Press Association 2018. Motoring News articles do not reflect the RAC's views unless clearly stated.