Why fuel prices are rising at fastest rate in 18 years

Fuel prices in England are rising at their fastest rate in nearly two decades, according to new analysis from the RAC.

What’s the damage?

A surge in the value of oil and decline in the strength of the pound combined to push up the cost of petrol by 6p a litre in May, with the average asking price of unleaded now 129.41p. The average price of diesel increased by even more last month, with 6.12p added to a litre.

RAC said this was the biggest monthly increase in the price of fuel since 2000.

Why are prices going up?

Price rises at the pump follow a huge jump in the oil prices over the past year, with Brent Crude breaking through the $80 a barrel mark in May for the first time in nearly four years. Oil peaked at around $120 a barrel in 2014 but soon after dropped to as low as $40.

Will price hikes continue?

Yesterday Bloomberg reported that the US government had asked Saudi Arabia and other Opec producers to increase oil production by around 1 million barrels per day, following the rise of US gasoline prices to their highest level in three years.

That could help to stabilise prices at the pump, or even bring them down.

But will UK consumers benefit?

Perhaps not. While soaring oil prices and a weak post-Brexit pound is “a punitive combination for anyone that drives regularly” says the RAC, The Times reports that some campaigners have accused fuel companies of “capitalising by raising pump prices when the wholesale value increases while failing to pass on costs when oil prices decline”.

Howard Cox, founder of the FairFuelUK campaign, said current pump prices are 1p to 2p per litre more than they need be.

“Businesses in the fuel supply chain are yet again exploiting the already highest taxed motorists in the world by not reducing pump prices when oil prices fall” he said. “They rise like a rocket and fall like a feather. As a consequence, inflation, GDP and consumer spending is being impacted badly by these greedy companies.”