Fuel prices had finally started to fall in July 2022 after reaching record levels earlier in the month, offering some relief to drivers facing exceptionally high costs at the pumps.
Average UK petrol prices had fallen from their early-July record of around 191.5p per litre, while diesel prices had also started to ease. The AA said further falls in wholesale costs could eventually save motorists around £10 on a full tank, provided retailers passed the reductions on to drivers.
With fuel prices still close to £2 per litre, even a relatively small reduction could make a noticeable difference to the cost of filling a car.
One of the main reasons fuel prices had started to fall was a reduction in wholesale fuel costs.
Wholesale petrol prices had been declining for several weeks, following the sharp increases seen earlier in 2022. The fall in wholesale costs was linked partly to lower crude oil prices, although the relationship between the oil price and what drivers pay at the pump is not immediate.
The AA reported in July 2022 that average petrol prices had fallen to around 188.8p per litre, compared with a record of approximately 191.5p earlier in the month. That represented an initial saving of around £1.50 on a typical tank.
The organisation suggested that petrol prices could fall by as much as another 20p per litre if lower wholesale costs continued to be passed through to consumers.
For motorists, that could have meant savings of around £10 on a full tank compared with the record prices seen earlier in July.
Although wholesale fuel prices can change quickly, fuel prices at petrol stations do not always move by the same amount or at the same time.
Petrol stations buy fuel at different times and may have supplies that were purchased when wholesale prices were higher. This means a forecourt cannot necessarily reduce its prices immediately every time the wholesale market falls.
The Competition and Markets Authority (CMA) was already examining the UK road fuel market in July 2022 because of concerns about the difference between crude oil prices and wholesale petrol and diesel prices.
The CMA’s road fuel market review found that rising crude oil prices and wider refining margins were important contributors to higher prices at the pump.
This helped explain why falling crude oil prices did not automatically translate into an immediate reduction in fuel prices for drivers.
At the time, filling a typical family car with petrol could cost close to £100.
With average petrol prices around 188.8p per litre, a 50-litre tank would cost approximately £94.40 to fill. A 60-litre tank would cost around £113.28.
That meant even a few pence per litre could make a meaningful difference for drivers who regularly covered long distances.
For example, a 10p reduction in the price of a litre of petrol would save £5 on a 50-litre fill-up and £6 on a 60-litre tank.
A 20p reduction would double those savings.
This was why the AA’s prediction of a potential £10 saving on a full tank attracted so much attention from motorists. However, the saving depended on the wholesale reductions being passed through to forecourt prices.
Fuel prices can vary significantly between petrol stations, even when the forecourts are relatively close to one another.
In July 2022, the RAC reported that only around 10% of more than 4,500 forecourts included in its analysis were selling petrol and diesel at what it considered a fair price based on wholesale costs. Independent forecourts made up the majority of those offering lower prices.
This highlighted the importance of comparing prices before filling up.
Drivers could potentially save money by checking several nearby petrol stations rather than automatically using the same forecourt every time. However, it is also worth considering the distance required to reach a cheaper station, as driving several miles out of your way can reduce or eliminate the saving.
Falling fuel prices were welcome news, but drivers could also reduce their fuel costs by changing the way they use their cars.
Driving smoothly and avoiding unnecessary acceleration and heavy braking can improve fuel economy. Maintaining a steady speed where conditions allow can also help reduce fuel consumption.
Tyre pressures are another important consideration. Under-inflated tyres increase rolling resistance, which can cause a car to use more fuel.
Regular servicing can also help ensure that the engine and other mechanical components are operating correctly.
You can find more practical advice in our guide on how to be more fuel efficient when driving.
Reducing unnecessary weight, avoiding excessive idling and combining journeys can also help reduce the amount of fuel a car uses.
For more advice on reducing both fuel consumption and emissions, see our guide on how to lower car emissions and save money on fuel.
The sharp increase in fuel prices during 2022 was driven by several factors.
The Russian invasion of Ukraine caused significant disruption and uncertainty in global energy markets, while crude oil prices had already risen substantially following the recovery from the COVID-19 pandemic.
The CMA reported that the price of both petrol and diesel had increased by more than 60p per litre over the previous year by July 2022. It identified rising crude oil prices and the widening refining spread as the principal drivers of the increase.
The UK Government had also introduced a 5p-per-litre fuel duty cut in March 2022, which was intended to provide some relief to motorists.
Despite that reduction, the combination of high wholesale costs and the wider pressures on the energy market meant fuel prices remained exceptionally high.
The falls seen during July 2022 were the beginning of a longer decline from the year’s record levels.
Official figures show that average petrol prices peaked at around 188.8p per litre in July 2022, while diesel reached around 197.4p per litre. Prices subsequently fell considerably over the following months.
The important point for drivers at the time was that the direction had finally started to change.
After months of rapidly increasing fuel prices, wholesale costs were falling and forecourt prices were beginning to follow.
However, the speed and size of those reductions depended on how quickly lower wholesale costs were passed on by fuel retailers.
The fall in fuel prices in July 2022 provided some much-needed relief after months of record increases.
However, motorists could still save money by comparing forecourt prices, avoiding unnecessary journeys and driving efficiently.
It was also important not to drive significantly further simply to find a cheaper litre of fuel. The cost of the extra journey could outweigh the saving.
For drivers who regularly cover high mileages, small improvements in fuel economy can add up to significant savings over the course of a year.
While nobody could predict exactly how far fuel prices would fall, the decline in wholesale costs provided some hope that the extraordinary prices seen earlier in 2022 would not last indefinitely.
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