With the price of a barrel of oil back up to January 2020 levels
and some analysts predicting prices could hit $80 this year as
pandemic restrictions ease, the RAC is warning UK drivers need to
brace themselves for further potentially dramatic pump price
increases.
With oil now at around $64 a barrel, the only thing stopping
forecourts from raising their prices is the stronger pound to
dollar exchange rate ($1.39 today, compared to $1.30 in January
2020), as oil is traded in US dollars. This means any weakening
of the pound or further increases to the oil price are very
likely to lead to higher costs for drivers and businesses.
While it can be impossible to predict currency exchange rate
changes, there appears to be a strong likelihood that the cost of
oil will increase as a result of global vaccination programmes
rolling out and the resulting increase in travel, signalling
higher pump prices for UK drivers.
Having dropped to just $13 last April, the price of a barrel of
oil has now recovered, jumping by $20 in just three months. With
some analysts predicting oil could reach $80 a barrel this year,
a price last seen in October 2018, petrol prices could rise to
around 130p and diesel to 134.5p based on today’s exchange rate
remaining constant – and more if the exchange rate falls. At $100
a barrel – a price that JPMorgan has said is a possibility next
year – petrol and diesel could hit records high of 143p and 148p
respectively (previous highs were in April 2012 – unleaded
142.48p and diesel 147.93p).
RAC Fuel Watch data shows that petrol prices have already been
rising for 13 straight weeks, with a litre now 8.03p more
expensive than 22 November 2020 at 121.84p per litre, and the
situation with diesel is even more pronounced, with prices now
having risen for 14 weeks (up 7.68p since 15 November 2020) at
124.91p per litre.*
RAC fuel spokesman Simon Williams said: “When the pandemic hit
last year, the effect on forecourt prices was nothing if not
dramatic – those still driving through March and April paid less
to fill up than they had done since mid-2016, when the price of
oil plummeted as a result of deliberate over production.
“But by the summer the oil price had rebounded and today is at a
level not seen since the start of 2020, meaning storm clouds are
once again gathering over UK forecourts. Ironically and rather
unfortunately, as economic confidence grows as measures to combat
the coronavirus take effect, it’s likely to mean drivers end up
paying more to fill up in the coming weeks.
“With the Chancellor’s Budget now less than two weeks away, the
last thing drivers, and possibly the economy, need is a fuel duty
increase – not least as petrol prices have now been rising for 13
consecutive weeks. A hike in duty at a time of rising fuel prices
could put unprecedented pressure on lower-income households and
might have the negative effect of forcing everyone who depends on
their cars to consider cutting back on other spending.”
