We seem to be experiencing a period of yoyo-ing fuel prices in the UK. Gradually prices are rising alongside sudden small drops that temporarily suggest a halt to increasing prices. But how will Brexit impact the price of petrol and diesel at the pump?
According the Simon Williams, a fuel spokesman for the RAC, “Both petrol and diesel are now at their highest points for more than three years which is bound to be making a dent in household budgets.
“We urge fuel retailers to be fair to motorists and pass on the current savings in the wholesale price of petrol and diesel at the pump.”
Industry professionals have urged supermarkets to ease pricing but even this dependable source of cheaper fuel is failing to live up to tradition.
So far in 2018, fuel prices have continued to rise, with motorists experiencing a third consecutive month for price increases in January – large supermarket forecourts appear to have hit drivers the worst with the largest price increases.
Williams continues: “Reflecting downward movement in wholesale prices on the forecourt, however small, is important for retailers as motorists generally believe there is little transparency in the price of fuel, unless of course costs are on the up when they understand all too well they will quickly be paying more to fill up.”
Thankfully, the RAC’s concerns have been heard, with three of the UK’s leading supermarkets reducing their fuel prices in February 2018, by up to 2p per litre – reflecting the recent drop in the cost of oil.
This will hopefully spark a chain reaction prompting other retailers to lower their prices too. However, again this proves the yoyo effect of fuel prices in the UK – January experiencing both wholesale and pump price on the rise, whilst so far in February, the cost has reduced. So, is there a way to maintain steady fuel prices?
Could the yoyo trend of petrol and diesel prices be put to a stop when the UK leaves the European Union?
Specialists in van leasing Northgate Vehicle Hire consider if Brexit could be the answer to steady fuel prices. Could this yoyo trend be put to a stop when the UK leaves the European Union?
The UK reached a peak in reliance of imported energy in 2013. Whilst it has fell slightly since then, the UK still relies on the import of energy for at least 38% of its total energy consumption – and this is a trend mirrored across many European countries.
In 2014, all EU countries were importing more energy than they exported. However, the OPEC made a decision to increase domestic fuel production in 2014 too – which led towards a fuel price drop to 98p a litre in January 2016 – the lowest fuel had been since 2009, during the financial crisis.
At the time of the in-out referendum, fuel prices rose by around 10p per litre. However, following the vote to leave the EU, the value of the pound took an immediate fall of 20% against the dollar, leading industry experts warning that the vote marked the end of cheap fuel in Britain. That’s because imports now cost more than before the vote.
However, since then fuel prices have been less than steady, with UK drivers experiencing multiple rises and falls in the years since then.
Why do fuel prices fluctuate?
Global factors are one of the main reasons that the price of oil goes up and down so often. The uncertainty of Brexit and devaluation of the pound is affecting the cost of fuel within the UK – especially as the UK imports so much of its fuel. Currently, the significant increase in fuel prices is down to the increase in oil costs, with Brexit being a small contributor.
The RAC has warned that prices may rise following the finalisation of Brexit. But the UK leaving the EU won’t affect trading terms between the US and UK meaning the cost of fuel from one of the UK’s main providers won’t be affected.
However, the UK should prepare for the uncertainty that Brexit poses. If the value of the pound weakens, whilst the cost of oil continues to rise, the UK economy may struggle with new higher fuel prices.
“While the fuel market is very hard to predict at the best of times there is currently even greater uncertainty as the price of oil went through the $70 a barrel mark in January for the first time in more than three years, while sterling has strengthened against the dollar making wholesale fuel cheaper as it’s traded in dollars,” said Simon Williams.