Middle East tensions increased average fuel prices in June

Three months of falling fuel prices have come to an end after increased tensions in the Middle East have pushed up the average cost of diesel and petrol by 3p and 2p respectively.

RAC Fuel Watch data shows that unleaded now costs 134.17p a litre on average, up 2p since 1 June, meaning the cost to fill a 55-litre family car stands at £73.79 (£1.07 more than at the start of the month).

The price of diesel went up even more – by nearly 3p (2.8p) a litre, from 138.39p at the start to 141.21p at the end. This added £1.55 to the cost a household pays to fill a family car.

Supermarket prices saw below-average increases last month, with petrol up 1.3p from 128.96p to 130.26p, while diesel rose by 1.6p from 135.06p to 136.67p. But it’s once again drivers in Northern Ireland who benefit from the cheapest visits to the forecourt – a litre of unleaded there costs 128p on average, around 6p less than the average across the whole of the UK, with diesel at 134p.

The primary cause of drivers paying more at the pumps was the cost of a barrel of oil jumping from around $64 (£47) in late May to a high of almost $79 (£58) on June 19, following escalating tensions between Israel and Iran.

Fears that Iran – one of the world’s biggest oil-producing nations - might block oil exports along the Strait of Hormuz on its southern coast injected uncertainty into the market, pushing oil prices up.

However, contrary to what was predicted by some analysts, the oil price has since fallen and ended the month at $67 (£49), only a few dollars more than it was at the start of June.

July crucial for future price increase indication

The RAC hopes that pump prices will now stabilise, meaning drivers don’t see any further immediate increases at forecourts this month.

But much depends on the level of margin retailers decide to take on the fuel they sell to drivers.

The RAC said this is something of a concern as the Competition and Markets Authority’s latest report into the sector, published on Monday (June 30), once again called out high retailer margins and a lack of competition as reasons why pump prices aren’t lower.

RAC fuel spokesperson Simon Williams said: “The arrival of summer has brought some wholly unwelcome increases to pump prices, with retailers wasting no time in putting them up following increased tensions in the Middle East.

"Unleaded and diesel are now both at their highest levels since late April, although we see no reason for further increases as wholesale prices have come back down again.

“July will be a telling month – will retailers halt further price rises, or even cut them if wholesale costs continue to slide?

"Or will drivers be stuck having to pay an elevated amount for the foreseeable future?

"This is particularly topical given it was only two days ago that the Competition and Markets Authority noted how weak competition within the fuel retailing market is."

Williams said that prices are still a long way off the record of three years ago. Fuel prices ramped up when the Russia/Ukraine conflict saw the average price of unleaded hit an unprecedented 191.53p a litre and diesel climb to 199.21p, with some retailers charging well in excess of £2 a litre.

He added: “As fuel represents a substantial chunk of most households’ monthly outgoings, it remains the case that drivers need to be guaranteed a fair deal every time they fill up.

"The creation of a Government-backed Fuel Finder scheme by the end of this year should make it easier to find the cheapest forecourts.

"But just because the price is cheaper depending on where you buy it doesn’t mean it’s as low as it could be.

"That depends on retailers more accurately reflecting wholesale price drops and ending so-called ‘rocket-and-feather’ pricing."