Diesel prices on UK forecourts are stubbornly refusing to fall in line with crude oil costs, averaging 197p a litre according to the AA, just shy of October's record high of £2 per litre. Petrol, by contrast, has fallen more sharply by 6p to 168p from its early October peak of 174.7p, the highest level since August 2022. The AA described the diesel situation as 'dismal', highlighting the growing gap between the two fuel types.
The disparity stems from constraints on diesel production and limited refining capacity, according to Christopher Waller, a governor of the US Federal Reserve, who spoke at a conference in London this week. Waller pointed to geopolitical pressures affecting global oil supply. He explained that increased tanker traffic through the Strait of Hormuz, combined with insurance costs and ship-to-ship oil transfers needed to guard against Iranian attacks, are reportedly boosting oil prices by $20 to $30 a barrel. As a result, elevated diesel prices in the United States are not expected to fall as quickly as crude oil prices would in a more stable Middle East environment, he said.
The petrol market shows more promise for drivers. The AA said another 10p reduction could be possible, as wholesale costs have fallen significantly. Wholesale unleaded fell from 77p a litre to 68p during the second half of October and now sits below 62p. Each 5p reduction at the pump reduces the cost of filling a typical 55-litre tank by £2.75. Luke Bosdet, the AA's spokesperson on pump prices, said it was 'hit and miss' but some petrol stations are already offering fuel below 160p in certain areas, based on government fuel finder data.
However, Bosdet highlighted stark regional differences in pricing. London and the south-east lack fuel stations offering the cheaper petrol prices available in northern England, Wales and Scotland. Some forecourts are still charging close to October's peak prices despite wholesale costs falling substantially since mid-October. 'Given how much wholesale costs have fallen since the middle of last month, that is unforgivable,' Bosdet said. For diesel, only a small further reduction at the pump is possible, as the wholesale cost has fallen around 4p a litre since mid-October.
High fuel costs are placing significant financial strain on both households and businesses across the UK. Waller warned that energy prices are likely to remain 'elevated', suggesting relief at the pump may come slowly for consumers and commercial operators who depend on fuel.