Experian Catalist UK averages were 141.35 ppl and 144.84 ppl for October 19, 2021, when Petrol Retailers Association (PRA) forecast pump prices would break records before the end of October. The previous record of 142ppl for petrol and 148ppl for diesel was set in April 2012.
24 October 2021: petrol prices reach record high and diesel is near
It didn't take long to see that PRA was right. According to RAC/Experian Catalist data reported on Monday morning, the average daily petrol price per litre hit 142.94p on Sunday, 24th October 2021. This is separate from the weekly average record price reported by the government.
According to RAC Fuel Watch, the price of unleaded has increased by 28p a litre since October 2020, adding £15 to the cost of filling up a 55-litre family car.
Simon Williams, the RAC fuel spokesman, said: "This is truly a dark day for drivers, and one which we hoped we wouldn't see again after the high prices of April 2012. This will hurt many household budgets and no doubt have knock-on implications for the wider economy."
"Even though many people aren't driving quite as much as they have in the past due to the pandemic, drivers tell us they are more reliant on their cars now than they have been in years, and many simply don't have a choice but to drive."
"There's a risk those on lower incomes who have to drive to work will seriously struggle to find the extra money for the petrol they so badly need."
"We urge the government to help ease the burden at the pumps by temporarily reducing VAT, and for the biggest retailers to bring the amount they make on every litre of petrol back down to the level it was prior to the pandemic."
Diesel is still not there yet - even though the 146.50p a litre registered on Sunday is only 1.43p short of its all-time high of 147.93p in April 2012. According to RAC Fuel Watch data, a full tank of diesel now costs £76.59, an increase of £1.40 over September and £11.63 over a year ago.
What is causing fuel prices to soar in the UK?
It is primarily due to the continually rising price of crude oil, which recently reached US$85 per barrel for Brent Crude. This represents an increase of more than 50% since January 2021 and has been caused by a reduction in production from OPEC and Russia at the same time that global economies are experiencing a rapid recovery from the global pandemic, according to the PRA. This position is unlikely to change in the near future, and some analysts believe oil prices will rise to US$100 a barrel by Christmas.
The increasing price of crude oil is not the only factor influencing petrol prices in the UK.
The UK switched over to E10 petrol in September 2021 in order to become greener. Unleaded now contains 10% ethanol instead of 5%. Due to the higher cost of ethanol than petrol, fuel prices have increased around a penny per litre since the change, according to the RAC. Ethanol prices have risen by 52% since E10 was introduced, so this could increase even further. In each litre, the bio and petrol components add up to around 50p.
As well as that, there are various other taxes that are applied to the cost of petrol: duty is 57.95p a litre and VAT is almost 24p. The VAT is applied on top of all other elements of the petrol price, including duty and retailer margin.
Retailers have also increased their average margin on a litre by 2p since April 2020, from around 5.5p to 7.5p.
Since most of us stayed home during the first UK lockdown last year, petrol sales at the pumps have plummeted. Retailers, especially the smaller independent ones, are now trying to balance their books.
Across the UK, average pump prices are currently being softened by some of the largest retailers who usually have a three- to four-week lag between their fuel delivered prices and the prices charged at the pumps. Last week, two major grocery retailers in Belfast competed for customers by offering petrol and diesel at prices below the standard wholesale costs of 125.9ppl and 130.9ppl, respectively.
The PRA also points to the production profile in Western Europe as a possible explanation for the wholesale price increase.
S&P Global Platts advised PRA: “Physical spot market activity has seen gasoline and diesel rise in tandem with the wider energy complex, and this has a knock-on effect, boosting retail prices for road and heating fuels.
“Lower stock levels in Northwest Europe are tightening supply and this is accompanied by stronger demand for gasoline in the US, which is an export outlet for the European gasoline market. There’s also stronger demand in the petrochemical sector, which is attracting certain components that would be otherwise destined to gasoline blending."
“The picture for diesel is not dissimilar, with limited refinery output coupled with stronger demand across Europe and a boost of demand from the heating fuels lifting values across the entire gasoil complex.”
Time to switch to EVs?
With electricity prices as low as 4.5p per kWh off-peak at home, the high petrol and diesel prices could encourage drivers to switch to electric vehicles.
The AA's fuel spokesman Luke Bosdet said: "Whether it's down to oil producers, market speculators, treasury taxes or struggling retailers trying to balance their margins, record pump prices must be saying to drivers with the means that it is time to make the switch to electric.
"As for poorer motorists, many of them now facing daily charges to drive in cities, there is no escape. It's a return to cutting back on other consumer spending, perhaps even heating or food, to keep the car that gets them to work on the road."
Without a doubt, pump prices madness makes EV adoption more advantageous than ever now, especially with the London ULEZ expanding today, 25 October 2021. Leasing an EV is the least expensive and easiest way to acquire a low-running-cost vehicle. Are you ready to make the switch? Just click below!
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