UK Petrol and Diesel Prices Could Fall After US-Iran Deal

What's happening to UK petrol and diesel prices?

Motorists in the UK could be facing cheaper fuel prices as a result of the US and Iran reaching an agreement to end their war.

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 fallen and the framework deal reached between the US and Iran has raised hopes they will fall further.

Motoring group the RAC noted that oil prices have already fallen on news of the deal which "should quickly bring prices down at the pumps".

How do wholesale oil prices affect the cost of petrol and diesel at the pump?

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 Iran war saw it peak at above $120. The price has been slipping in recent weeks and following news of the framework deal it fell to around $83 a barrel.

What has happened to petrol prices in the UK?

According to the RAC, the price of petrol reached an Iran war peak of 159.53p a litre on 28 May, while diesel's highest price during the conflict was 191.54p a litre on 15 April.

In the last week, the price of petrol has come down nearly 2p to 156.37p a litre, with diesel reducing by 3p to 177.89p a litre.

The RAC says it now costs £97.22 to fill up a 55-litre family car with diesel – £18.91 more than it did on 28 February, and £85.74 for a tank of petrol – £12.68 more than at the start of the conflict.

RAC head of policy Simon Williams said: "The oil price has already dropped as a result of the US Iran deal to open the Strait of Hormuz which is good news for drivers as this should quickly bring prices down at the pumps.

"If oil now begins to consistently trade around $85... we should see the price of petrol reduce to 148p a litre from its current average of 156p in the next couple of weeks," he added.

"Diesel, which currently costs an average of 177p, ought to fall to under 160p."

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 investigated these claims and it had "not seen evidence of retailers actively changing their pricing strategies to take advantage of the crisis".

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

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

Why has the Iran war had a big impact on oil prices?

The Middle East conflict sent global oil prices soaring as it effectively closed the Strait of Hormuz - one of the world's key water transport routes for oil, liquid natural gas and other essential commodities - limiting global supplies.

About 20% of the world's oil and liquefied natural gas normally passes through the waterway.

Analysis by BBC Verify showed that only a handful of ships have passed through the strait since the conflict began – in normal circumstances around 138 vessels make the crossing every day.

However, experts warn a return to normal levels of shipping through the Strait of Hormuz will take time, and the impact of the war will continue to affect the global economy for potentially months to come.

Where does the UK get its oil and gas?

The UK is heavily reliant on oil and gas imports, with the majority coming from the US and Norway.

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