Why do fuel prices keep rising and how do I find the cheapest fuel near me?

Credit: PA

The average cost of filling up a typical family car with a tank of fuel has broken the £100 mark for the first time, something industry leaders have dubbed "a truly dark day" for drivers.

Leading the PM to warn that the cost of fuel will "remain high for a while to come" - continuing the squeeze on household finances.

With prices at the pump continuing to rise and with no signs of slowing down, at least in the short term, Boris Johnson placed the blame for the price rise, and the general soaring cost of living, on "the aftermath of the worst pandemic for a century" and "global pressures... caused by the lingering effects of Covid and the shock of (Vladimir) Putin’s aggression in Ukraine."

The PM claimed the government is "firmly on your side" in cutting living costs, but critics have pointed to the fact the government takes 30p in VAT from every litre of fuel sold - up from 25p before the Russian invasion and on top of the 53p fuel duty per litre.

What are the current fuel prices in the UK?

Figures from data firm Experian Catalist show the average price of a litre of petrol at UK forecourts reached a record 182.3p on Wednesday.

That was an increase of 1.6p compared with Tuesday, taking the average cost of filling a 55-litre family car to £100.27.

The average price of a litre of diesel on Wednesday was 188.1p.

Some forecourts are already selling petrol and diesel above £2 per litre.

RAC fuel spokesman Simon Williams said: “There’s almost certainly going to be upward inflationary pressure, which is bad news for everybody.

“While fuel prices have been setting new records on a daily basis, households up and down the country may never have expected to see the cost of filling an average-sized family car reach three figures."

The RAC spokesman added that many people will now be hoping for further financial support from the government.

Especially as the 5p per litre cut in fuel duty introduced by Rishi Sunak a few short weeks ago "looks paltry" in the face of wholesale petrol costs which have risen five times that amount since March.

What makes up the cost of a litre of petrol or diesel?

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The price you pay for petrol and diesel at the pumps is mostly governed by wholesale fuel prices.

Which RAC say these can be affected by:

  • the global price of crude oil

  • supply and demand for crude oil

  • oil refinery production and capacity

  • the pound to dollar exchange rate, as refined fuel is sold in US dollars per metric tonne

  • distribution costs

  • the margin fuel retailers decide to take

  • fuel duty charged by the government, currently 52.95p a litre

  • VAT charged at the end of every forecourt fuel transaction, currently at 20%

A number of those values will remain static such as fuel duty rate and VAT.

However, others such as oil prices and the exchange rate between dollars and sterling are subject to change - all of which add to rising prices.

Currently, it is a mixture of high oil prices and a weak sterling that is driving up prices at the pump.

Data from RAC showcases that while an average litre of petrol would cost 182.37p, just 45% of that figure is wholesale petrol.

The remainder of that 182.37p is broken down by bio content, delivery and oil company fees, retailer fees, fuel duty and VAT.

How do I find the cheapest petrol and diesel near me?

How can I reduce my fuel costs? Credit: PA
  • Check the latest sites such as RAC Fuel Watch average price

  • PetrolPrices app, which collects prices from forecourts across the country

  • Comparison site Confused.com also has a petrol price checker service

  • Industry leaders also suggest efficient driving

  • Credit card cashback, which could offset higher prices by putting money back in your account

  • Shopping around in your local area

While there seems to be no limit on high prices can soar, there are restrictions on how low prices can go.

This is because taxes such as fuel duty and VAT make up the lion's share of the price per litre.

The RAC state that even if fuel was given away, the price would still need to include duty and VAT.

High levels of taxation directly affect the price of a litre of petrol or diesel.

The UK government also makes more money in VAT when fuel prices are at a premium.

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