Have you ever driven past a fuel station and took a quick glance at the prices? Of course you have, we’ve all done it. But what exactly determines UK fuel prices? It’s a multifaceted equation influenced by various factors. Let’s delve into the factors behind the price per litre of fuel.
Factors Affecting UK Fuel Prices
The pricing of fuel in the UK is the combination of three factors:
- Combined Costs: This includes wholesale expenses, distribution charges, and margins for retailers.
- Fuel Duty: Levied by the government.
- VAT: Value Added Tax imposed on fuel.
Wholesale, distribution, and retail margins constitute the expenses for retailers, covering the purchase cost, transportation, and profit margins per litre.
Furthermore, UK fuel prices are closely tied to the global market price of Brent Crude oil, regulated by the Financial Conduct Authority in the UK.
Influence of Oil Prices
Data from the RAC Foundation indicates that UK fuel prices have stayed relatively lower than the ten-year average. This can be attributed to various underlying factors. A significant drop in Brent crude oil prices occurred at the outset of 2020 due to oversupply by OPEC and a price dispute between Russia and Saudi Arabia.
However, while the price per barrel decreased, the pandemic subsequently elevated distribution and retail expenses, resulting in petrol and diesel prices remaining lower than average but less tied to oil market fluctuations.
The invasion of Ukraine by Russia in early 2022 escalated crude oil costs further due to global pandemic recovery. As Russia holds a prominent position as a major natural gas and oil producer, this event triggered scarcity-related price hikes in fuel, especially in European markets affected by reduced Russian oil imports.
According to Fastmarkets, at the beginning of 2025 fuel prices in the UK were lower than at the start of 2024, however, economic uncertainty and political instability could see a swift change.
Setting Fuel Prices: Who’s Responsible?
There isn’t a single authority responsible for setting fuel prices in the UK. Retailers individually determine these prices based on desired margins and various influencing factors, including oil price fluctuations, duty changes, and VAT alterations. Hence, pump prices may vary daily.
Changes in oil prices, duty rates, or VAT adjustments directly impact what consumers pay at the pumps. However, the decision to pass on cost changes to consumers rests with each retailer.
How To Save On Fuel Costs
Reducing fuel costs should be a priority for all businesses as fuel counts as of the largest areas of expenditure. As mentioned above UK fuel prices often fluctuate due to market conditions and government regulations.
Thankfully for businesses, fuel cards provide an option to reduce fuel costs. Fuel cards react to the latest market conditions which means when there is a market decrease you will see those savings straightaway.
Fuel Cards: How Do They Work?
Fuel cards enable businesses to purchase fuel in a convenient method at fuel stations that are part of the network. Rather than using cash or credit cards, the businesses is invoiced for their transactions weekly. Learn more about how fuel cards work.
Fuelwise Fuel Cards
The Fuelwise Fuel Card is the leading fuel card in the UK. It is designed for small and large businesses, providing a safe, secure and convenient method for purchasing fuel. Whether you have one vehicle or 100, you can experience the great benefits at over 4,400 sites in the UK. Your Fuelwise Fuel Card is accepted at all major brands including Circle K, Maxol, Texaco, Top Oil, ESSO, Applegreen, BP, Jet, Shell, plus many independents.
How Much Will You Save?
To discover how much you will save with fuel cards request a diesel price quote today.
It only takes 30 seconds to do and is the first step to reducing your UK fuel prices.
Marketing Manager at Fuelwise
Dominic has been covering the fuel and fleet management industry for over seven years, writing about Fuel Cards, Telematics, and Vehicle Cameras. In 2023 he was awarded the Excellence In Marketing award at the Causeway Chamber Business Awards, followed by the Best Use Of Social Media In Service/B2B at the 2024 NI Social Media Awards. You can connect with Dominic on LinkedIn here.
