Iran War Fuels £10 Billion Fuel Price Surge, Pressuring UK Chancellor

Motorists have spent an additional £10 billion at the pump due to soaring fuel prices, a situation exacerbated by the ongoing conflict in Iran, according to research. This surge has put pressure on Chancellor John Healey to abandon the Labour party's planned fuel duty increase in the upcoming Budget.

The study found that petrol drivers have paid over £3 billion extra, while diesel motorists have incurred an additional £7 billion. This equates to an average collective daily cost increase of £42 million for UK drivers over the past eight months, compared to the period before the Iran conflict began on February 28.

This rise in pump prices has also resulted in a nearly £1.7 billion Value Added Tax (VAT) windfall for Chancellor Healey, as the 20 percent levy generates more revenue for the Treasury when fuel costs are higher.

Calls to Abandon Fuel Duty Hike

The RAC Foundation, which conducted the study by analyzing daily fuel consumption and pump prices against pre-war figures, has prompted renewed calls for Healey to scrap the planned fuel duty increase. Critics argue that abandoning the hike would provide relief to struggling motorists and help curb inflation. The conflict has contributed to global oil prices reaching a six-month high, with Brent crude briefly surpassing $117 a barrel.

Conservative shadow transport minister Greg Smith criticized the potential fuel duty increase, stating it would be "just plain wrong in this global climate." He added that hiking the duty would amount to "bleeding out drivers at the pumps."

AA President Edmund King noted that a worker commuting 15 miles each way now faces an annual petrol bill around £330 higher than before the Iran conflict. He emphasized that "working people and businesses need meaningful relief at the pump."

King suggested that the 5p per liter relief, initially introduced by the Conservatives in 2022, should be extended and complemented by a further 3p reduction in fuel duty, bringing the total levy down from its current 52.95p per liter.

Upcoming Duty Increases

Under current plans, fuel duty is set to increase by 3p per liter on January 1, followed by an additional 2p rise on March 1. The Treasury is also scheduled to end a 16-year freeze on fuel duty in April, adding another 1p. VAT will further increase the cost by 1.2p per liter, potentially adding nearly £4 to the cost of filling an average family car.

Reports suggest that Healey may postpone the New Year fuel duty hike in the upcoming Budget, though the duration of any delay remains unclear. Such a decision could impact government revenue significantly at a time of fiscal challenges.

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