UK Fuel Prices Surge Past £2 Per Litre Amid Inflation Concerns

Hundreds of petrol stations across the United Kingdom are now charging more than £2 per litre for diesel, with approximately 10% of forecourts exceeding this threshold. Analysis indicates that 236 stations are selling diesel at over £2 a litre, and an additional 633 are priced at 199.9 pence per litre. This surge brings average diesel prices to 193.85 pence per litre, while petrol has climbed to 171.27 pence per litre.

These near-record prices represent a significant increase from pre-conflict levels, with diesel costing an average of 142.38 pence per litre and petrol 132.83 pence per litre before the recent geopolitical events. The cost to fill an average 55-litre family car tank now stands at approximately £94 for petrol and £107 for diesel, compared to £73 and £78 respectively before the price hike.

The rising fuel costs are a significant contributor to the UK's inflation rate, which has climbed from 2.9% to 3.1%. Experts attribute the surge to the effective closure of the Strait of Hormuz and global oil supply constraints linked to the ongoing conflict with Iran. These factors are expected to keep prices elevated for months.

The situation puts pressure on the government to reconsider planned increases to Fuel Duty. Currently, a 3 pence per litre hike is scheduled for January 1, followed by an additional 2 pence on March 1. These increases are intended to generate billions for the Treasury, but critics argue they will further burden households already facing rising energy bills, which are predicted to increase by up to 26%.

Impact on Haulage and Economy

The haulage industry, heavily reliant on diesel, is particularly affected. Higher diesel costs are inevitably passed on to consumers, leading to increased prices for goods on shop and supermarket shelves. One haulage firm reported a £1 million weekly increase in fuel bills since the conflict began, a rise from £1.9 million to £2.9 million per week for its fleet of 3,000 lorries. This firm stated it has no choice but to pass these costs onto its customers.

Drivers have reportedly spent an additional £7.5 billion at the pumps due to the ongoing situation. Concurrently, the Treasury has benefited from a £1.3 billion VAT windfall, as the 20% levy generates more revenue when pump prices are higher.

Calls for Tax Relief

Representatives from motoring organizations and political parties have called for government intervention. Simon Williams, fuel guru for the RAC, urged for fuel tax relief in the upcoming Budget, suggesting measures such as abandoning the Fuel Duty hike, cutting taxes, or reducing VAT on fuel. Richard Tice, deputy leader of Reform UK, criticized the planned Fuel Duty increase, stating that drivers are "literally being taken for a ride" and called for immediate tax cuts instead of further financial burdens.

A Treasury spokesperson stated that decisions on taxation are for the Chancellor to announce at fiscal events and declined to comment on speculation.