Average petrol prices in the UK are reaching record highs this summer, adding to the already tense cost of living crisis.
According to the RAC’s Fuel Watch, unleaded now costs 191.43p per litre, super unleaded costs 203.7p per litre and diesel costs 199.05p per litre – prices so high people are taking to the motorways in England and Wales to protest this week.
So what is causing this unprecedented rise in price?
The cost of filling up your vehicle has shot up considerably since the EU confirmed its latest set of sanctions against Russia over its invasion of Ukraine.
This may seem surprising as the UK may no longer be in the bloc, but this has a knock-on effect for our petrol pumps.
Here’s everything you need to know.
Petrol prices are on the rise
According to vehicle insurance company RAC, petrol and diesel prices were hitting daily records across June this year, as the supply cannot keep up with the demand.
To fill a 55-litre family vehicle with unleaded petrol now costs £105.19, the RAC foundation has claimed.
But, analysts believe that fuel prices could start to level off, and hopefully start coming down over the next few months as the wholesale price of oil drops.
However, it is down to petrol retailers to change the price for the consumer – and forecourts often obey the so-called “rocket and feather” pattern, where prices zoom up quickly but are exceptionally slow to come back down. This means it could be a while before petrol prices decrease significantly.
What about the fuel duty cut?
The Treasury announced in March that there would be a 5p cut to fuel duty for the next year to provide some relieve to motorists.
Including VAT, the overall saving totted up to 6p per litre, which chancellor Rishi Sunak dubbed the “biggest cut to all fuel duty rates ever”.
Yet, critics allege retailers are not passing this saving onto customers.
Why is this happening?
Fuel prices can fluctuate a lot due to the global price of crude oil, the supply and demand of the fossil fuel, costs from the oil refineries and distribution costs.
The current increase in prices is partly due to the production companies who cut back on supply during the pandemic, and who have struggled to meet the demand since lockdown was lifted.
This meant oil prices were high even at the start of this year, before Russia invaded Ukraine.
But international politics play a significant part, too.
Prices rose sharply in May after the EU imposed its sixth set of sanctions against Russia, subsequently reducing Europe’s oil supply.
The UK is not reliant on Russian imports but the rest of the EU is, meaning the overall supplies for the West are squeezed as a result.
At the time, the president of the European Council, Charles Michel, tweeted that the agreement for the 27 EU nations “immediately covers more than 2/3 of oil imports from Russia, cutting a huge source of financing for its war machine”.
Officials believe this cut off 70% of the Russian oil immediately by halting tankers, and that more than 90% of Russian oil sales will eventually cease as a result of this policy.
Oil (and gas exports) pump serious money into Russia’s economy, so this new decision is a big deal for Moscow.
But it’s also significant for the bloc – more than a quarter of the EU’s imported oil came from Russia last year. Between the start of the war in February and the beginning of April, Europe actually increased the amount of fuel it bought from Russia.
EU leaders have also agreed to ban most Russian oil imports by the end of 2022, while the US has announced a total ban.
It comes after Ukraine increased the pressure on its allies to cut off oil and gas supplies coming from Moscow.
How the EU’s oil supplies impacts the UK
The UK has already promised to phase out imports of Russian oil by the end of the year, even though it accounts for only 8% of UK demands in total. However, this move from EU still affects Britain’s supplies.
The UK gets the rest of its oil supplies from the North Sea and Norway, along with some exports from the US, Canada, the Netherlands, Sweden, Belgium and Saudi Arabia.
But, with limited access to the third largest oil producer in the world, Russia, other countries are tightening their grip around their own supplies – meaning the UK has access to less oil overall.
As the RAC’s fuel spokesperson Simon Williams pointed out to Sky News in May, the EU’s decision therefore has a knock-on effect for the UK’s cost of living crisis.
The cost of living crisis has already pushed inflation in the UK to its highest level in 40 years, at 9.1% and counting.