Why UK diesel prices have breached the £2 per litre mark

The average price of a litre of diesel at the pump stands at an all-time high of 200.01p, according to the RAC motoring body. Over the past seven months, the Iran war has severely disrupted the production and transportation of oil across the region, causing the price of fuels made from crude to surge. Motor fuel prices fell back when the US and Iran agreed in June to a framework deal to end the fighting, but rose again as tensions resurfaced. Meanwhile, US President Donald Trump has responded to rising prices by mulling a ban on US diesel producers selling overseas - a move which could push UK prices even higher. Crude oil is a key ingredient in petrol and diesel, which means that higher wholesale costs make filling up a car more expensive. The price of petrol and diesel is also heavily influenced by demand and refining capacity. Analysts say every $10 (£7.55) per barrel increase in the oil price pushes up pump prices by roughly 7p a litre. Since the Iran war began, the price of a barrel of Brent crude – the global benchmark for wholesale oil prices – has been very volatile. Generally speaking, news of further conflict drives the price up while hopes of an end to the war pushes the price down. Before the Middle East conflict, Brent was trading just over $70 a barrel but the fighting saw it peak at above $120. In early July, after the framework deal was signed, prices fell back to near the $70 mark. The price climbed back up again after peace talks collapsed and it is now around $100 a barrel. A lot of oil is produced in the Middle East, and the conflict has severely disrupted the production and the transportation of it, causing its price to jump. Of particular concern to wholesale oil traders was Iran's effective closure of the Strait of Hormuz - a vital waterway south of the country through which one fifth of the world's oil and gas usually flows.

There are signs that wholesale oil transport through the strait is returning to pre-war levels, but wholesale prices remain high because traders fear this might not last. Meanwhile, the transportation of refined oil products, such as car and plane fuel, remains down because of damage to refineries in the region and because refined products are more flammable, making them more dangerous to move during a conflict. Before the war began, the average price of petrol was 132.83p per litre and diesel was 142.38p, according to the RAC. Meanwhile, petrol has hit an average 174.71p a litre, which is the highest in more than four years but lower than its peak of 191.5p during the summer of 2022. Simon Williams, head of policy at the RAC, said prices at the pumps will not come down until there is a "sustained lower oil price - over several weeks, not days". Because transporting oil is a slow process, price movements in wholesale oil markets take about a fortnight to show at the pump. Fuel retailers have denied accusations of price gouging during the conflict. The official markets regulator said it had "not seen evidence of retailers actively changing their pricing strategies to take advantage of the crisis". A government scheme called Fuel Finder , external lets drivers compare the cost of fuel offered by petrol stations across the UK. In May, the then Prime Minister Sir Keir Starmer said a planned 5p increase in fuel duty due in September would be postponed until the end of December because of the conflict. Williams said that the UK government has "limited leverage when it comes to ending the US/Iran war" but lowering fuel duty further or reducing VAT could "ease the burden" at home. Even if you don't drive a diesel car, you could still be hit by the rise in diesel prices. That's because diesel is used heavily in agriculture and, crucially, in haulage. So transporting some of our biggest essentials – particularly food – around the country is getting more expensive.

Previous episodes of high costs at the pumps have even had a knock-on effect on school transport and trips, putting pressure on councils and schools, particularly in rural areas. Drivers can compare fuel prices at different petrol stations - how does it work? While Trump has suggested he might ban US producers from selling diesel overseas, he has not done it yet and views differ on how serious this threat is. If it does happen, many agree it would hurt the countries which heavily depend on US diesel. One such country is the UK, which depends on the US for around 17% of its diesel supplies. Other European countries also import a lot of US diesel. As such, many worry any ban could drive UK diesel prices up even further. And while the ban would be likely to reduce US diesel prices in the short-term, experts say it could have unintended effects that could hurt US production – and put pressure on US diesel prices – in the long-term. In the UK, we have four refineries. Between them, they make more than enough petrol to meet our needs, so we sell the rest as export. However, they don't make enough diesel, which means we rely on imports. The closure last year of refineries in Grangemouth and Immingham has increased that reliance, meaning we now buy over half of our diesel from overseas.

⚡ Effects Interpreter