Influences on petrol & diesel prices

Fierce competition in the UK has driven down prices, increasingly making fuel retailing a high volume, low margin business.

UK pump prices, excluding duty and tax, have been consistently amongst the lowest in the EU over the last 8 years.

Forecourt pump prices are influenced by a number of factors, including taxes, crude oil and refined product prices, exchange rates and competition.

In the UK excise duty and VAT accounted for about 66% of the pump price of a litre of petrol or diesel in 2007.

In recent years there have been increasing seasonal variations in wholesale prices with, at times, the cost of diesel being higher than that of petrol, particularly during winter months.  These market price variations are reflected in the pump price for diesel and petrol.

There are a number of factors at work, which broadly fall into the category of market or structural influences. Market factors include:

• increased crude oil prices, with particular demand for “sweeter” lower sulphur crudes like those from the North Sea
• seasonal winter demand for heating gas oil which is similar to diesel and made from the same basic refinery components
• summer export of petrol to the USA
• increased global demand for transport fuels
• short-term market factors reflecting fuel specification changes, extreme cold weather or temporary supply problems

  Structural influences include:

• a growing supply imbalance in the UK between petrol and diesel
• fuel specification changes for both road and non-road fuels