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UK drivers have recently seen the steepest monthly reduction in diesel prices since the year 2000, with costs dropping by 17p per litre during June, according to motoring organization RAC. This notable decline follows a period of volatility triggered by the outbreak of war involving the US, Israel, and Iran on 28 February. The conflict caused significant disturbances to energy production and transportation in the Middle East, leading to surging fuel costs worldwide.
Fuel prices have significantly eased since June when the US and Iran reached a framework agreement aimed at halting the hostilities. The AA motoring group anticipates that petrol and diesel prices will continue to decrease, remarking that “the timing is perfect for the start of the summer holidays.” However, RAC highlights that although prices are falling, they remain “still some way off” from pre-war levels.
The price of crude oil, the main input for petrol and diesel, heavily influences pump prices. Analysts estimate that every $10 (£7.53) increase in crude oil prices adds roughly 7p per litre to fuel costs. Before the conflict, Brent crude oil traded at around $70 per barrel but climbed above $120 during the war. Following the peace framework, prices have retreated to approximately $72 per barrel.
Looking at the UK market specifically, RAC data shows petrol reached a peak of 159.53p per litre on 28 May, while diesel hit its highest average price of 191.54p per litre on 15 April during the conflict. By June, diesel prices dropped from 183.75p to 167.14p per litre on average, and petrol declined from 159.37p to 151.40p per litre. Despite these falls, RAC notes that prices are still well above pre-conflict figures of 132p per litre for petrol and 142p per litre for diesel. Simon Williams, RAC’s head of policy, commented: “As things stand, petrol should dip under 150p soon and diesel ought to get to below 160p, but we would need the price of oil to fall further to see a return to the pre-conflict prices.”
The recent conflict’s impact on oil prices stems largely from its effect on the Strait of Hormuz, a critical shipping route through which about 20% of the world’s oil and liquefied natural gas passes. The war effectively restricted passage through this waterway, tightening global supply and pushing prices upward. Although the ceasefire agreement has stabilized the situation, experts caution it will take a considerable amount of time before shipping levels return to normal and that the conflict’s economic consequences may persist for months.
The UK relies extensively on imports for its oil and gas needs, primarily sourcing these commodities from the US and Norway. While the North Sea provides some oil, most of it is exported for refining outside the UK. The global marketplace oil price ultimately determines how much the UK pays domestically for petrol and diesel
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