Record Surge in UK Fuel Prices During March

March witnessed an unprecedented surge in UK petrol and diesel prices, according to analysis by the RAC. This record monthly increase, in pence per litre, is primarily a consequence of elevated wholesale energy prices stemming from the US-Israel conflict with Iran, which has disrupted global oil markets.

Impact on Motorists and the Economy

The conflict led to a 20p rise in petrol and a 40p increase in diesel over the month. This translated into a significantly higher cost to fill up a typical family car, with petrol increasing by over £11 and diesel by approximately £22 compared to pre-conflict prices. The price of Brent crude oil, a global benchmark, saw considerable volatility, though pump prices remain below the peaks observed in summer 2022.

The knock-on effects extend beyond the forecourt. Higher fuel costs amplify transport expenses for businesses, potentially leading to increased prices for consumers on goods and services. Furthermore, certain crude oil derivatives are used in fertiliser production, raising concerns about potential impacts on food prices.

Broader Economic Implications

While domestic gas and electricity bills are shielded in the short term by the existing price cap, sustained high energy costs could influence future cap adjustments. The Bank of England's efforts to manage inflation, which was expected to fall this year, could be complicated by rising energy prices. This uncertainty has already led to some mortgage lenders increasing their rates.

Concerns about fuel supply have also emerged, with some industry figures suggesting potential shortages in Europe due to disruptions in the Strait of Hormuz. However, the UK government and Fuels Industry UK maintain that Britain's fuel supplies are robust and resilient, advising the public to continue purchasing fuel as normal.