UK Petrol Prices and the World Oil Market
As cynical Britons we expect to be ripped off every time we turn the corner, and the price we are paying for our petrol is certainly a cause for National Debate. Every other day it seems we are bombarded with news of another hike in petrol prices at the fuel forecourt. What are the main driving forces behind changes in the fuel price per litre?
Firstly, we know that fuel is taxed, but this level of taxation will usually only change, at maximum, once per year. So, this is essentially a fixed cost. Included in this is VAT as well as 'fuel duty'. As of September 2011 this totals more than 50% of the cost per litre for unleaded, super and diesel.
Secondly, there are operating costs and profit margins for the petrol station owners. These are typically small a couple of percent of the cost. So, even if a station owner decides to double its operating profit, it may only make 1p change in the total cost and that won't happen very often.
Finally, there are the petrol suppliers (such as Shell, BP), they have to cover the costs of refining, transportation, profit and also the raw costs of the oil itself. It is the oil cost that can cause the price of petrol to fluctuate so often.
The question we ask here is "How well do the changes in the cost of oil per barrel translate into the average price per litre of unleaded petrol?"
Oil and Petrol Prices
The graph below shows how the average oil price per barrel has varied for the last 5 years and this oil price is compared to the average price of unleaded 95 in the UK.
The oil price has been converted into GB pounds using historical exchange rates.
To give a true representation of the fuel cost both the tax (duty and VAT) and retailer costs have been removed.
It can be seen from the graph below that there is excellent correlation between the oil and unleaded petrol price. If the price of oil starts to rise, then so does petrol. If the oil prices fall then this drop in price gets passed on to the vehicle owners.
The Price of Petrol in the UK tends to Follow the Price of Oil
Here are the raw figures of oil price (£'s) versus the total cost of unleaded petrol per litre.
Oil price for £1.50 per litre?
Extrapolating from the graph above in can be seen that in order for the average price per litre of unleaded to hit £1.50 the price per barrel of oil needs to be around $160 or around £100 for 3-4 weeks - given the current level of taxation.
It's worth pointing out that at a more detailed level there will be more discrepancies between the two prices as daily fluctuations in the price per barrel of oil will not always be reflected in the price per litre of petrol due to the large amount of fuel already stored in refineries, depots and forecourts around the country. This fuel 'buffer' can last several weeks.
A good source for finding out what the current and historical price of oil per barrel can be found at the BBC website in the commodities section.
There is obviously a strong correlation between changing petrol prices and oil costs. As the price per barrel of oil goes up so does the cost of unleaded petrol per litre with a short time delay in-between. Different retailers will have different profit margins but overall the price changes are set by the raw material costs (and of course would be altered by changes in the level of taxation set by the government on the pump price)
We are now fondly remembering the good old days of only paying £1 per litre and if the world economy picks up again then demand for and hence oil prices will increase again and we if oil break $160-170 a barrel we would be looking at £1.50 a litre.
This petrol pricing information comes from user submissions using the map below. Please search for your local petrol station and tell us how much you are paying at the pump!
Petrol Price Search
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"As it now appears diesel cars apparently do pollute the air with particles though better CO2 emissions and councils as of today i guess intend to make diesel owners pay more for parking etc and most people now own a diesel does this mean unleaded vehicles will start to rise in value and popularity?"
"I see people have been asking for an updated graph for some time. the premise of this article (that pump price follows oil price) doesn't fit today's price of 119p. "
"Why are you so far behind with your data? Also I thought that oil was bought in advance often far in advance of it appearing as petrol on the forcourts."
"Although you will never thank them. The government is making it easier for us to get off oil before oil gets off us by insulating us from the oil market. In the US when Oil doubles or quadruples so does there fuel bill. Peak Conventional Oil was in 2006 it's all downhill from here. In a few years you'll wish you could afford one of those rubbish electric cars, but you will be spending your money on food that costs triple what it does now."
"2010 JUNE In pakistan The Price of CNG is .55 $/l and Diesel .72 $ p/l and Petrol .82 $"
"During the last (2007 or 8) petrol price crisis when it was around £1.20/litre, the price of a barrel of oil was 140 - 150 dollars. At the moment crude oil is hovering around $70, give or take, yet petrol is still in the region of £1.15 -20. I think that your GRAPH needs updating. Who's kidding who here?"
"You fail to explain the following points; WHY IS IT, the price of both petrol and diesel utilize a non existent and non legal denomination of U.K. currency i.e.: 0.9 pence ? Also WHY IS IT, that no matter how much I put into my tank, the price payable is always a round sum, never i.e. £49.64. Where does the Odd amount disappear to???? "
"but, what can we do?? the government doesnt seem to be bothered, we might as well jack in all our jobs and let this government take pride and finance us all"
I give up!!!!
"once again we are being ripped off, it seems any excuse to do this, cost of oil, exchange rates,what next? I know, how about paying an entrance fee to the petrol station to allow the use of the petrol pumps... comments please.. "
ripped off grafter
"Please update as my gut tells me there is a disparity now and I'd love to know if right or not."
"Am I imagining this but is the Diesel Petrol differential falling?"
"last year $80.00 = £1.00 per litre. Now $72.00 = £1.02 per litre???? why are the petrol companies allowed to get away with this obscenity"
"28th May 2009. Oil hits a 6 month high @ just over $64/bar'l. So why are Sainsburys (in Redditch) charging 98p/ltr for unleaded..? At the peak of $110/bar'l - it was approx 1.04p/ltr..!! CONphused.com - or what..!! "
"I agree with the comment one below. Please update the graph as soon as possible. The information would be really useful."
"I am an ordinary motorist fed up with being played by the Rich oil companies bleeting about the fall in profits and the government taking a cut, therefore defending the oil companies. Who is going to support the consumer?, who do we complain to?, when is something going to be done?. It is my recollection that the high petrol pump prices started the current credit crunch crisis. Who Do we sue for this price rip off. Something needs to be done, NOW."
"Good article but needs updating oil price is now $40 per barrel or so - what was the petrol price last time oil was that price & why isn't it a lot lower than 90p now?"
"As the price of cude oil is now in the region of $45-$45 per barrel the price of petrol in the UK should surely be somewhere around 60p - 70p per litre even after allowing for the change in the dollar/pound exchange rate. Apparently once again the oil companies are playing both ends against the middle the rip us off once more !"
"Due to the number of factors that impact the price of fuel, including tax, refining costs, distribution costs (are these in turn affected by the price of fuel?) etc, all that can be sensibly asked here is whether, when oil drops to a previous level, fuel drops to the same level it was before. The graph adequately shows this, but unfortunately indicates that petrol should be much less than 80p per litre right now, when it isn't. This report needs updating to be relevant, as I imagine that all those other factors (tax etc) have changed since this was put together. Please could you do so?"
"For people looking for much lower fuel prices now that oil is $40 a barrel, remember 2 things. 1. Sterling has fallen 25% against the dollar. 2. Tax makes up about 65p of the price of a litre of fuel, so there is a floor to the price and we are pretty near it I reckon. M."
"Agree with Robert's comments on graph scales. Wouldn't it be better to index both series ie start at 100 and look at the relative change?"
Princess Michael of Kent
"With oil at $41.00 per barrel, according to your graph the price at the pumps should be around 74pence/litre, it's still around the 90 pence mark.
The country and the Government are a joke....... "
"Neil, your statement is just wrong."
"Heating Oil refining instead of diesel and massive demand outstripping production because of small refining capacity.....SO they say"
"Your graph is totally skewed and inaccurate. The left scale goes from 50 to 90, and increase of 80%. The right side goes from 80 to 105, an increase of 31%. If the scales aren't relative the graph is pointless."
"Oil price is now $50 - Why is petrol price still @ £0.90p? - it should be @ £0.80p !!!!!"
"This government is an absolute joke once again it has proven to be completely incompetent and powerless at running this country. How is it these companies like BP and Shell, who have just announced record quartley profits in which they are passing their wealth onto others within their organization i.e. bonuses and way above inflation wage rises 10%+. It's nice to see they are concerned about the current economic crisis and their customers. It's clear to me these companies do what they like and clearly have the monopoly to set the fuel price to what they see fit. Before all this dramatic demand for oil and the massive surge in fuel prices diesel was about 2p more expensive than 95ron unleaded, so how is now that diesel is about 15p more than unleaded and even more expensive than premium unleaded fuels. Also they are keen to put the price up but very slow to pass on the reductions to customers. Mr. Brown you say quote 'if these companies do not pass on the reductions to customers you will have to intervene'. Well we are still waiting for you to act upon this, I think it is a case of trying to win votes back, Mr. Brown actions speak louder than words and if you want to win back public support I think you should start with what people or concerned about the most. Not giving hand outs to people on benefits, which seems to be typical labour, what about the working middle class people who go out and earn a living. No wonder people want to claim benefit and are not concerned about finding work, they are better off on the dole in a labour government. Look at the statistics it's clear in black and white 'RIP OFF BRITIAN' ALL HE WANTS IS THE TAX OFF FUEL "
"Which oil price is it tracking, Brent crude or west texas? And if both are trading at $55/barrel and dropping.The article mentions that there is a close relationship historically in the UK with the oil versus the petrol price When can the consumer expect to see this reflected at the pumps? "
Jason da Silva
"The graph on your website shows how the price of petrol in the UK follows the price of oil - but this table is a year old and the price of petrol most certainly is NOT following the price of oil at present. Oil is around $55 per barrel, but fuel here in York is still well above 90p per litre, and diesel above £1.05. It's a national disgrace ; what a b..... government!!"
"Crude is now down to $59 a barrel - less than half the $140 peak, and less than the cost of crude this time last year. This is not reflected in the pump prices. Rip off indeed..."
"As fuel prices have recently dropped ( in Oct 08), why is there still broadfly the same net price differential between diesel and petrol pricing? The cost per litre differential is still broadly the same as it was at peak pricing. Should you not expect a similar percentage drop for each type of fuel (given their source is crude), thus narrowing the price differential at the pump? Or is the oil giants' argument about supply and demand? My O level chemistry taught me there was more Diesel in Crude than the Petrol fractions?"
"27/10/08: The last time Oil was this low ie $62 a barrel Unleaded was well below the 90p/ltr mark. So why the high price now. In addition diesel was also only a few pence more than unleaded but now its at least 12p or more. Therefore the cost of most food items etc will be higher as the majority is transported by road using diesel. It's RIP OFF UK where the government turn a blind eye because of the extra tax they make."
"diesel is currently £1.22 per litre even though oil is now $95 per barrel,down from $145 pb,when are greedy petrol bosses going to be put under pressure to reduce the burden on british drivers! "
"When are the pump prices going to reflect a barrel price that's down $57 since July?"
"I have found that recently my local petrol stations have been increasing the price of diesel every 2 days. A site that I visited suggested that going by the increase in oil prices over the last 3 months we would expect to see an increase of around 12p over the same time period. I'm sure it has gone up by much more, does anyone know for sure?"
"The thing I cannot find explanation is why the gap between unleaded and diesel has increased so much over the past few months. I recall a year or so ago when the gap was only 4 or 5p, it is now 12p. can anyone explain ?"
"You have denominated the price of oil in US Dollars. The price of the petrol is denominated in GB pounds. Over the period shown, the dollar has changed in value by 20%. If this is taken into consideration, the gap between oil price and petrol price is widening. This suggests we are seeing less competition in the refining & retailing sector. In fact, the potential profit margins are now huge."
"Hi Darren Converting from Dollars to Sterling didn\'t make a lot of difference when I looked at it. The main reason is that oil has more than doubled in price in Dollar terms, but the Dollar itself has only sunk around 20% against the pound."
"The details show the oil companies are following crude prices with end product prices. However, it does not take into consideration exchange rates (as oil is bought in US dollars, not £). It would be interesting to see how that changes the graph."
"The price really needs to be compared on an equal basis, this doesn't take account of changes in exchange rate, the dollar is worth less than it was 18 months ago. "