RAC Cars News


What's Going on With Fuel Prices?

By raccars Published

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As the cost of fuel rises by 5p per litre in just five days, we ask, just what's going on with fuel prices?

Just what is happening to fuel prices? If you look at a graph showing the cost of fuel over the past couple of years, it bears a striking resemblance to a roller-coaster ride you'd find at Blackpool Pleasure Beach. And we're the donkeys who have to pay for it at the pumps.

It only seemed like yesterday we were celebrating the impact of a supermarket price war, with some of the giants "slashing" 2p off a litre of fuel.

Don't get us wrong, we appreciate the drops, but some kind of consistency would be nice. It's almost impossible to predict how much a litre of fuel will cost from week to week and anyone who has to travel long distances will know that the prices can vary from region to region.

This is purely down to two factors – competition and supply and demand. In rural areas, where competition is low, prices are higher. Whereas in more urban environments, where there's greater competition, prices tend to be lower.

Independent retailers also struggle to compete with the supermarkets, forcing many of them out of business. Research earlier in the year suggested that a staggering 75% of petrol stations have closed in 30 years, with just 8,600 left in January 2013.

But it's the global economy which dictates the real cost of filling your tank. In the past five days, the average cost of a litre of unleaded has risen by 5p to 138.2p. Similarly, diesel has increased by 4.78p to 145.10p per litre.

You can blame the weakening of the pound for this. As crude oil is traded in dollars, it makes it expensive for the UK, pushing up the prices you pay at the pump.

Not only that, the cost of oil on the international market is currently running very high - another factor determining the cost of fuel. So the picture is looking rather bleak.

Some analysts are predicting a further increase of 2p in the short term, plus there's also the prospect of a rise in fuel duty this September.

For its part, the government has frozen fuel duty for the past two years, a move which, it claims, has avoided a 10p per litre rise in real terms. But with 60% of the price of a litre of fuel going straight into the chancellor's pocket, there's little in the way of gratitude for these measures.

So it looks like we're in for more ups and downs when it comes to the cost of fuel. It might be easier if we all just rode a bike.

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