What has happened to petrol prices and how does this affect you?

The world has changed since the onset of the pandemic in significant ways. One way many have been affected is in the price of petrol.

An article on the RAC website included a graph that tracks petrol prices from 2004 until January 2022. In 2004, it was possible to get petrol for as little at 76p per litre. In contrast, the figure from July 1st this year showed an all time high of 191.27p for petrol and an even more eye-watering figure of 199.01p for diesel. No wonder people are having to make tough decisions.

Covid supplied brief relief at the pumps for drivers

In an article from the Guardian in May 2020 (3 months into the pandemic) petrol was priced at £1 in three of the major supermarkets: Morrisons, Asda and Tesco. Previously, these figures were last recorded in 2016.

What caused this huge drop in petrol prices?

Global oil prices plummeted to a 21 year low due to ‘a standoff over production levels between Saudi Arabia and Russia and a sharp slump in demand for crude and transport fuels due to coronavirus lockdowns.’

At one point, a barrel of Brent crude crashed from $80 to $18 per barrel.

Warnings from the RAC

While consumers welcomed the drop, Simon Williams from the RAC believed the low prices would not last. He predicted demand would increase due to two factors: The US and China opening for trade and the worlds’ largest producers cutting back production.

A respite in the cost of running a car

For a few brief months in 2020, it was possible to fill a family car for about £40. However, as a country we weren’t supposed to be travelling anywhere unless a journey was considered ‘essential’. Most people adhered to the regulations although some decided their essential travel entailed long road trips!

Working from home became the norm for those that could, and education moved online for many while children of essential workers were taught onsite.

In April 2020, during the most severe restrictions car travel fell to as low as 22%. At this time, birdsong filled the air and an eerie 28-Days-Later-feel permeated the country. Prices at the pumps nose-dived due to a drop in demand, oversupply, and a lack of storage.

How petrol prices progressed from March 2021

In March 2021, an article on petrolprices.com included an interview with the chair of the Petrol Retailers Association (PRA) Brian Maddison. He confirmed there were over 40 million drivers “who still rely on their petrol and diesel to get from A to B.” This figure was despite the growth in electrical vehicle ownership and repeated lockdowns. As restrictions eased, demand increased followed by prices. Motorists were now allowed to travel further and more often.

Why haven’t more people been like Dylan and gone electric?

One of the issues owners of electric vehicles face is the scarcity of charging points across the country. Coupled with insufficient battery life (for some vehicles), journeys are planned with military-like precision to ensure drivers aren’t stranded with a flat battery.

Looking to the future from the past

The RAC predicted in March last year that prices would reach record highs (at the time) of 148p per litre for diesel and 143p for petrol.

In a press release they reported how February prices at the pumps reached 151.16p. This meant the cost of filling a 55-litre family car was now £83.14 So it cost £3 more than at the start of 2022 and £15 more than the same time the previous year: an increase of 22%.

Why has the cost been so volatile?

Contributing factors to this increase include the actions of Russia who decided to invade Ukraine in February. Russia is the world’s second biggest oil producing nation. The invasion led to massive price rises and increases in global demand for oil. When Russia first invaded Ukraine the price of oil exceeded $100 for the first time in 8 years.

Crude oil price increased because demand increased. Russia’s invasion of Ukraine made the situation worse as many western countries decided to shun Russian oil. In the UK, the weak pound against the dollar made a demanding situation worse as oil is paid for in dollars.

RAC calls for action from the government

The RAC asked the treasury to “look at an emergency, temporary cut in the VAT rate levied on fuel to ease some of the pain drivers are facing.” (media.rac.org) The government responded with a 5p cut in fuel duty for one year. Many people feel this isn’t enough.

Protest as a mark of anger and despair

Motorists feel anxious at what has happened to fuel prices over the last twelve months. Alex Lawson writing in the Guardian on 4^th July discussed petrol prices and why the price at the pumps has remained so high.

Many believe as wholesalers costs fall retailers should be passing this on to consumers, but it seems this isn’t happening.

Why? Well, retailers accused the refineries of not passing on the drop in the price of crude oil. There is also a discrepancy between the wholesale cost which is dependent on the retailers’ contracts with fuel suppliers.

Government have weighed in accusing the retailers of profiteering. There are claims that supermarkets are not competing on fuel prices as they have in previous years.

Now the Competition and Markets Authority (CMA) are investigating. The whole sector is facing calls for transparency to reveal how the purchase price at the pumps is arrived at.

Meanwhile, the government is under pressure to reduce VAT on fuel or introduce a further cut in fuel duty.

How are our European neighbours responding to the fuel crisis?

In Germany fuel duty has been cut by 25 pence per litre. Whereas in the Netherlands, Ireland, and Spain there’s been a 17p reduction. France has given drivers a 14-p cut, but in the UK fuel duty stands at 52.95p a litre for petrol and diesel.

How are the public responding to this crisis?

In Bristol we have seen fuel protests on the M32, M4 and M5. Drivers have instigated ‘go slows’ to show the government how distressed they feel.

What do the protestors want?

They are calling for a cut in fuel duty by gridlocking motorways and major A roads. FairFuelUK founder Howard Cox said he’s “fully supportive” of the demonstrations if they are conducted legally. He commented “people have reached the end of their tethers.”

Cox pointed out how other countries have cut fuel duty more than the British government and asked why we aren’t offered similar help.

All agree the government should be doing more to address the cost of fuel as it effects on all our lives.

There needs to be a collaborative effort between the government, retailers, and refineries. It would seem the most straightforward action would be for the government to cut fuel duty significantly to help its citizens. Perhaps we should all give them a slow handclap as well.

You'll be pleased to hear that driving lessons with A-Class Driving School have remained the same price.

By Sophie Dracott - Clear Copy UK