The cost of living crisis is affecting every walk of life in the UK, and petrol prices are no exception.
7 June 2022 saw the biggest petrol price increase in 17 years, with the cost to fill the tank of an average car hitting the £100 mark.
This price rise will disproportionately impact people on lower incomes and in rural areas, while smaller businesses – who are already reeling from the pandemic – face big increases to their operating costs.
This guide will explain the causes, how much prices have risen by, whether they’re expected to fall, and what impact this will have on the cost of living.
How much does petrol cost in the UK?
As of 28 June 2022, petrol prices in the UK are as follows:
- £1.90 per litre of unleaded petrol
- £1.98 per litre of diesel
Some locations in the UK have already started selling petrol at an astonishing £2.02 for a litre of petrol, and £2.04 for a litre of diesel.
In 2021, filling up a typical SUV car with a 55-litre tank would cost you £71.24. It’ll cost you £104.50 in 2022, a jump of £33.26.
On average, people fill up their cars 16 times a year, which would mean spending £1,672 on fuel annually. This is an increase of £533 over the £1,139.84 car owners would’ve paid in 2021.
Why have petrol prices risen so much?
The main reason behind the petrol price rise is the increase in the cost of oil. Oil prices have jumped up because of a combination of factors, including a greater demand globally for oil as lockdowns eased, and the invasion of Ukraine by Russia.
Russia’s aggression meant that countries relying on its oil had to either cut it out completely, or continue buying from Russia, in turn fueling the invasion. The countries choosing the former found themselves buying oil from other sources, such as the US or Saudi Arabia.
With more countries turning elsewhere for oil, those supplying it have increased prices to meet growing demand.
Widespread decommissioning of old refineries also means companies have to ship oil further to reach customers, which results in increased prices.
Oil prices after lockdowns
The post-lockdown demand for oil was substantial too. In April 2020, prices for oil went into the negative for the first time ever, with West Texas Intermediate crude oil barrels plummeting from $18 (£14) per barrel, to -$37 (-£29).
That meant oil companies had to pay buyers to take the oil off of their hands and find somewhere to store it. Negative prices for oil were a short-lived phenomenon however, and by the summer of 2020 prices began to rebound in a major way.
Countries which were easing restrictions suddenly found themselves in dire need of crude oil to fuel their economic recoveries. Oil suppliers struggled to ramp up production to meet demand, causing the price to shoot up rapidly.
By November 2021, the price of oil was $83 (£66) per barrel. A brief dip in December 2021 saw the cost-per-barrel fall to $70 (£55), but this blip didn’t last long. As of June 2022, oil prices sit at an eye-watering $121 (£96).
This is shy of the all-time-record of $147 (£117) per barrel reached on the eve of the 2008 financial crisis, though industry figures warn the worst is yet to come.
How much are petrol prices expected to rise by?
Jamie Dimon, chief executive of JPMorgan, warned at the start of June that prices could reach between $150 (£119) and $175 (£139) a barrel later this year.
Goldman Sachs was slightly less pessimistic in their predictions, saying oil could average more than $140 (£111) a barrel by the third quarter. Either way, the predicted increases are very worrying for the average person looking to fill up their car.
Right now, petrol prices in the UK are widely predicted to reach £2 per litre — parts of the UK have already reached this.
The AA has suggested however that the recent price hike was “a huge shock and fuels speculation of a £2 litre just gives the fuel trade licence to pile on extra cost and the misery”.
Whether prices will hit £2 nationwide is currently uncertain.
Will petrol prices fall?
Experts predict that the peak of petrol prices is still some way off. The RAC released industry figures in June saying businesses selling petrol will likely continue increasing their prices.
This is because they’re having to buy petrol at increased rates, so eventually they will have to pass on these growing costs to customers.
Simon Williams, the RAC’s fuel spokesperson, described the petrol price rises as “frightening.”
He added that “with oil above $120 (£96.55) a barrel and sterling still at $1.2, worse is still to come.”
The RAC has pressed the UK government to urgently address fuel prices, suggesting a temporary reduction in VAT on petrol (which currently stands at 30p per litre).
The organisation has recommended that fuel duty should be cut too, with the government taking 53p per litre of petrol. The AA has suggested a 10p reduction in fuel duty, also saying the government should introduce a “fuel stabiliser” immediately.
This initiative would automatically reduce fuel duty when petrol prices increase, and rise when petrol prices decrease. That way, customers wouldn’t have to bear the brunt of unprecedented cost rises.
What are petrol prices like in Europe?
Petrol prices on average in Europe aren’t reaching the same heights seen here in the UK, but it’s not far off. In Spain, you’ll pay €2.07 (£1.78) for unleaded petrol as of 6 June 2022, which is a sharp jump from the €1.62 (£1.39) figure seen in late February 2022.
Elsewhere, drivers in France are paying €2.11 (£1.81) per litre, and Germany’s pumps are charging €1.94 (£1.67). Not good, but not quite as bad as the prices in the UK.
It’s a bleaker picture in some of the Nordic countries however — Finland pays €2.50 (£2.15) per litre, Norway just edges that at €2.54 (£2.19), but Denmark at €2.67 (£2.29) holds the unwanted position as Europe’s most expensive country to buy petrol in.
Is this a global issue?
Petrol prices around the world have increased, though not quite on the same scale as Europe.
An exception to this is Hong Kong, where a litre of petrol will set you back £2.36,making it the most expensive country on earth to buy petrol in.
Oil-rich countries such as Saudi Arabia haven’t been impacted much, with a litre of petrol there costing £0.49. Venezuela, home to the world’s largest proven oil reserves but wracked with inflation and corruption, sells petrol at £0.01 per litre.
The US, another huge oil exporter, has seen petrol prices increase to levels not seen since 2008. In fact, petrol prices in March 2022 broke 2008’s record of $1.14 (£0.92) for a litre.
At $1.3 (£1.06) per litre, it’s a far cry from the prices seen in Europe, but it’s important to remember that the US is the world’s top producer of crude oil.
So even countries like the US are far from immune when it comes to rising fuel prices.
How is the petrol price increase affecting the cost of living crisis?
Because many of the world’s economies are still reliant on petrol to function, an increase in the price of petrol has made almost everything more expensive.
The price of anything that needs to be transported by vehicles using petrol will rise, as businesses have to pay more to distribute items like food and essential goods.
Living in an oil-reliant economy means having to accept that when oil prices increase, everything connected to it will see costs rise as well. This makes the argument to decarbonise the world stronger every day, but it’s not a simple task.
What can you do to avoid the petrol price crisis?
Other than not driving or purchasing an electric vehicle, there are few options for avoiding the petrol price rise.
You should consider using public transport, but even this isn’t exempt from price increases. In February 2022, the cost of a bus ride in London rose to £1.65 — an increase of almost 6.5%.
Petrol price rises will impact public transport companies, who will have to increase fares to compensate.
For those who can afford an electric vehicle, you’ll save a good amount of money on what you’d usually spend on petrol, despite rising electricity costs.
The latest figures show running an electric car will cost you 9p per mile, compared to a petrol car which costs 22p per mile to drive.
This development is contributing to the growing popularity of electric cars, as our National Home Energy Survey showed. It revealed that 17% of UK residents plan to buy an electric car in the next 12 months.
Also, 69% said they would purchase an electric car if money were no object.
If buying a new electric car seems too expensive, it’s worth looking at second-hand electric cars. There are plenty available on the market and you can pick up popular used models like the Nissan Leaf for around £8,000–£10,000. Older models can be found going for £5,000.
Summary
The dramatic rise of petrol prices is a massive cause for concern, especially for the millions of people who are reliant on petrol and diesel to go about their lives.
It further highlights our need to move away from fossil fuels, but the reality is that right now, electric cars remain too expensive for many people.
One solution is for the government to make sure petrol price increases are met with tax reductions, so that the average UK resident isn’t paying too much. By reducing VAT and/or fuel duty tax, petrol prices for customers can stabilise.
The government should also subsidise the purchase of electric cars. Making it easier for people to buy an electric vehicle would immediately help reduce emissions, and reduce reliance on petrol.
