Iran War Fuels £10 Billion Fuel Cost Surge for UK Motorists, Pressure Mounts on Chancellor

Motorists in the United Kingdom have spent an additional £10 billion at the fuel pumps as a direct consequence of the Iran war, according to new research. This surge in expenditure, driven by elevated global oil prices, has intensified pressure on Chancellor John Healey to reconsider Labour's planned fuel duty hike in the upcoming budget.

The study reveals that petrol drivers have collectively spent over £3 billion more, while diesel motorists have incurred an additional £7 billion since the conflict began on February 28. On average, UK drivers have faced an extra £42 million daily to refuel over the past eight months compared to pre-war prices.

This increase in pump prices has also resulted in a significant value-added tax (VAT) windfall for the Treasury, estimated at nearly £1.7 billion. The 20 percent VAT levy naturally garners more revenue when fuel costs are higher.

In response to these findings, the RAC Foundation has urged Chancellor Healey to abandon Labour's planned fuel duty increase, arguing it would provide much-needed relief to drivers and help to curb inflation. Global oil prices have reached their highest levels in over six months this week, with Brent crude, the international benchmark, briefly surpassing $117 a barrel, a figure not seen since April.

This trend suggests that drivers may continue to face higher fuel costs in the coming months, compounding the financial strain as energy bills are also anticipated to rise in January.

Tory shadow transport minister Greg Smith criticized the potential fuel duty increase, stating, "Hiking Fuel Duty is just plain wrong in this global climate, and I fear Labour will once more bleed out drivers at the pumps." He questioned whether the government would support motorists or continue what he described as a "war on the motorist."

AA President Edmund King highlighted the significant impact on individuals, noting that a worker commuting 15 miles each way now faces an annual petrol bill approximately £330 higher than before the Iran conflict. "For someone on a lower income, that is a significant extra cost just to earn a living. Working people and businesses need meaningful relief at the pump," King stated.

King also advocated for extending the existing 5p per litre relief, initially introduced by the Conservatives in 2022, and implementing an additional 5p cut to fuel duty. The current fuel duty stands at 52.95p per litre. However, under current government plans, fuel duty is scheduled to increase by 3p per litre on January 1, followed by another 2p increase on March 1. Additionally, the Treasury is expected to end a 16-year freeze on fuel duty in April, adding a further 1p, with VAT contributing an additional 1.2p per litre. This cumulative increase of 7.2p per litre would add nearly £4 to the cost of filling an average family car.

Reports indicate that Chancellor Healey may postpone the New Year fuel duty hike, but the duration of any delay remains uncertain. Such a delay could represent a substantial financial challenge for the Treasury, which is already facing budgetary constraints.

As of Friday, average diesel prices were around £2 per litre, with petrol just under 174p per litre. These figures compare to 142.38p per litre for diesel and 132.83p for petrol before the Iran war. Consequently, filling an average family car with petrol is now approximately £23 more expensive, and with diesel, £31 more expensive than prior to the conflict.