UK drivers have spent an additional £7.5 billion at the pump since February 28 due to the conflict involving Iran, according to a study by the RAC Foundation. This surge in fuel costs has also resulted in a £1.3 billion value-added tax (VAT) windfall for the Treasury.
The escalating prices are linked to heightened tensions in the Middle East, which have driven global oil prices past $100 a barrel. Petrol prices reached a four-year high, with average prices climbing to 170.54 pence per litre, while diesel hit 192.86 pence per litre. These figures are the highest since August 2022 for petrol and July 2022 for diesel.
Before the conflict intensified, average petrol prices were 132.83 pence per litre and diesel was 142.38 pence per litre. The increased cost means filling an average 55-litre family car with petrol now costs £93, up from £73, and diesel costs £106, up from £78.
Diesel drivers have been disproportionately affected, accounting for £5.4 billion of the additional £7.5 billion spent and £894 million of the Treasury's £1.3 billion VAT gain. The RAC Foundation study highlighted that the increased cost for haulage firms, which predominantly use diesel, could lead to higher prices for goods and contribute to inflation.
These findings have intensified pressure on the Labour party to abandon its planned 3 pence per litre fuel duty increase, scheduled to take effect on January 1. Conservative shadow transport minister Greg Smith criticized the potential hike, calling it a "slap in the face to motorists from Whitehall." Richard Tice, deputy leader of Reform UK, accused Labour of "taking drivers for a ride" and urged the cancellation of the duty increase.
Steve Gooding, director of the RAC Foundation, noted that while the conflict's resolution is beyond government control, easing the financial burden on motorists and businesses through fuel duty decisions rests with the Chancellor. The study analyzed fuel consumption data and average daily pump prices since February 28, comparing them to pre-conflict figures.
Global oil prices surged above $100 a barrel last week for the first time since July as the Middle East conflict escalated. Brent crude, the international benchmark, traded around $106 to $108 a barrel. The effective closure of the Strait of Hormuz, through which approximately one-fifth of global oil supplies passed before the war, has contributed to these price increases.
Other countries have also seen fuel price hikes, with many Western governments implementing fuel tax cuts to support drivers. Reports indicate that former U.S. President Donald Trump attributed the soaring prices to the war in Ukraine rather than the conflict with Iran, despite diesel prices in the U.S. reaching record highs.
The planned fuel duty hike is set to add further costs for motorists, with a 3p per litre increase on January 1 and an additional 2p on March 1, which the Treasury anticipates will generate billions of pounds. The RAC's Simon Williams stated that with oil prices remaining above $100 a barrel, there is no immediate end in sight to high pump prices.
IMAGE3 Drivers have been forced to shell out an extra £7.5 billion at the pumps because of the Iran war, according to a study by the RAC Foundation
IMAGE4 Average petrol prices climbed again today to a post-war record of 170.54p a litre while diesel hit 192.86p, the highest for both fuels since summer 2022
IMAGE5 Tory shadow transport minister Greg Smith said pressing ahead with a Fuel Duty hike would be a 'slap in the face to motorists from Whitehall'
IMAGE2 Last week, US President Donald Trump tried to claim soaring prices were due to the war in Ukraine rather than the conflict he started with Iran