UK Fuel Prices Fall After US-Iran Agreement, Further Drops Expected

Motorists in the UK are already seeing cheaper fuel prices after the US and Iran struck an agreement to end their war, with further falls expected in the coming weeks.

When the conflict began on 28 February, fuel costs jumped as the war significantly disrupted the production and transportation of energy across the Middle East.

However, in recent weeks they have dropped and the framework deal reached between the US and Iran has sent them to their lowest point since the first days of the war in early March.

Motoring group the AA has said it expects pump prices to fall further and "the timing is perfect for the start of the summer holidays". Meanwhile rival group the RAC has said price reductions "should be faster and greater, particularly for diesel".

Crude oil is a key ingredient in petrol and diesel, which means that higher wholesale costs make filling up a car more expensive.

Analysts say every $10 (£7.53) increase in the oil price pushes up pump prices by roughly 7p a litre.

Since the war began, the price of a barrel of Brent crude – the global benchmark for wholesale oil prices – has been very volatile.

Before the conflict, Brent was about $70 a barrel, but the conflict saw it peak at above $120.

The price has been slipping in recent weeks and after the framework deal was signed it fell to around $76 a barrel. It has continued to drop and at one point fell below $72.48 (£55) a barrel, the price it was at the day before the US and Israel launched attacks on Iran on 28 February.

The RAC says it now costs £83.59 to fill up a 55-litre family car with petrol and £92.75 for diesel, However, this is still £10.50 and £14.40 respectively more than it did at the end of February before the conflict began.

The RAC's head of policy, Simon Williams, said: "Fuel prices are falling steadily in reaction to the drop in the price of oil and wholesale petrol and diesel costs which is good news for drivers who've had a torrid time at the pumps this year.

"But our analysis of wholesale data shows the reduction should be faster and greater, particularly for diesel. Drivers really ought to see average prices of below 150p for unleaded and below 160p for diesel in the next week or so."

Despite the conflict, petrol and diesel prices remained below the levels reached in the summer of 2022 following Russia's invasion of Ukraine, when petrol reached 191.5p a litre and diesel hit 199p.

Because transporting oil is a slow process, price movements in the wholesale markets take about a fortnight to show at the pump.

Fuel retailers have denied accusations of price gouging during the conflict. The official markets regulator said it had "not seen evidence of retailers actively changing their pricing strategies to take advantage of the crisis".

A government scheme called Fuel Finder, external lets drivers compare the cost of fuel offered by petrol stations across the UK.

Luke Bosdet, the head of policy at the AA, said the group had been surprised at the speed that prices had fallen and put it down to the scheme.

On 20 May Prime Minister Sir Keir Starmer said a planned 5p increase in fuel duty due in September would be postponed until 31 December because of the conflict.