UK fuel prices remained close to record highs in early April 2022, despite the government introducing a 5p-per-litre cut to fuel duty.
The sharp increase in UK fuel prices put considerable pressure on motorists, with petrol and diesel becoming substantially more expensive in just a few months. The Spring Statement, delivered by Chancellor Rishi Sunak on 23 March, reduced fuel duty on petrol and diesel by 5p per litre for 12 months.
However, the cut came at a time when wholesale fuel costs were already rising sharply. RAC figures published on 6 April showed that the average price of petrol had risen by 11.62p per litre during March to 163.28p, while diesel increased by 22.06p to 177.29p.
So why were UK fuel prices still so high, and why wasn’t the reduction in fuel duty immediately reflected at the pumps?
The government’s 5p-per-litre fuel duty cut was certainly significant. It took effect from 6pm on 23 March and represented the first cut to the main rates of petrol and diesel fuel duty in many years.
However, the timing made it difficult for motorists to see the full benefit immediately.
Wholesale fuel prices had already increased considerably before the announcement. RAC data showed that on the day of the Spring Statement, average petrol cost 167.01p per litre and diesel cost 179.90p. By 29 March, the averages had fallen to 163.52p and 177.47p respectively, but this represented only a partial reduction.
In other words, the 5p duty cut was being applied against a market where other costs were moving in the opposite direction.
The government said the reduction was worth around £2.4 billion to consumers over the following 12 months, so the measure did provide genuine support even though it did not translate into an immediate 5p reduction at every forecourt.
The biggest factor behind the increase was the rising cost of crude oil.
Russia’s invasion of Ukraine in February 2022 caused significant disruption and uncertainty across global energy markets. Russia was a major oil and gas producer, and concerns about sanctions and future supplies contributed to increased oil prices.
However, the situation was more complicated than the war alone.
Demand for energy had already recovered significantly following the COVID-19 pandemic, while global supply remained constrained. This meant wholesale fuel prices were already under pressure before the invasion of Ukraine.
The combination of recovering demand, supply constraints and geopolitical uncertainty pushed UK fuel prices to unprecedented levels.
March 2022 was particularly severe for motorists, with UK fuel prices reaching record levels.
According to the RAC, the average price of petrol reached a record 167.3p per litre on 22 March, while diesel reached 179.9p on 23 March.
Although the average prices at the end of March were slightly below those records, they remained dramatically higher than they had been at the beginning of the year.
For a typical driver, this meant that filling a car became significantly more expensive in a matter of weeks.
The situation was particularly difficult for diesel drivers because diesel prices increased by more than 22p per litre during March alone.
Fuel duty is an important part of the price motorists pay at the pumps.
Before the March 2022 reduction, the main rate of Fuel Duty was 57.95p per litre. The government reduced this by 5p to 52.95p per litre from 23 March 2022. VAT is also charged on fuel, meaning taxes make up a significant proportion of the final price.
Although taxation was an important part of UK fuel prices, it was not responsible for the sudden increase seen during early 2022.
The major short-term changes were primarily being driven by wholesale fuel costs, particularly the price of crude oil and the cost of refining fuel.
It was tempting to assume that fuel retailers were simply refusing to pass the 5p reduction on to motorists.
The reality was more complicated.
Retailers buy fuel at wholesale prices, and those costs had already risen considerably. A reduction in Fuel Duty could therefore be offset by increases elsewhere in the supply chain.
RAC analysis at the time showed that wholesale fuel prices were already rising before the Chancellor announced the duty cut, making it difficult for retailers to immediately reduce pump prices by the full 5p.
This doesn’t mean every retailer was pricing fuel in exactly the same way. Forecourt prices could vary significantly depending on location, supplier, supermarket competition and when a retailer had purchased its fuel.
The later Competition and Markets Authority review also found that crude oil prices and the growing gap between crude oil and refined fuel prices were major contributors to the rise in pump prices.
With UK fuel prices remaining high, motorists had several options for reducing their fuel bills as UK fuel prices continued to put pressure on household budgets.
Smooth driving can help reduce fuel consumption.
Avoid unnecessary hard acceleration and heavy braking, maintain a steady speed where conditions allow and anticipate traffic ahead.
Keeping your tyres correctly inflated is also important. Under-inflated tyres can increase rolling resistance and make your vehicle use more fuel.
Our guide on how to be more fuel efficient when driving contains more practical ways to reduce fuel consumption.
One of the simplest ways to reduce your fuel bill is to drive fewer miles.
Where practical, consider walking, cycling, public transport or sharing journeys with other people.
Combining several short trips into one journey can also help reduce unnecessary mileage.
Fuel prices can vary considerably between different forecourts.
Shopping around can therefore make a noticeable difference, particularly if you regularly fill a large tank.
The RAC Fuel Watch service provides information on average UK fuel prices and was one of the useful resources available to motorists during the 2022 price increases.
If you are already considering changing your vehicle, fuel prices can make efficiency an important part of the decision.
A smaller petrol car, hybrid or electric vehicle could potentially reduce your energy costs depending on how and where you drive.
However, the purchase price and running costs of any replacement vehicle should be considered alongside its fuel or electricity consumption.
If you’re looking to change your vehicle, you can browse used cars on MotorHype and compare vehicles available from private sellers and dealers across the UK.
In April 2022, there was considerable uncertainty over where fuel prices would go next. The outlook for UK fuel prices remained uncertain, with motorists facing the possibility of further changes in the months ahead.
Oil prices were extremely volatile, and the continuing war in Ukraine meant that further disruption to global energy supplies remained possible.
At the same time, demand for energy was recovering after the pandemic, adding further pressure to global markets.
The 5p Fuel Duty reduction provided some support for motorists, but it could not completely shield drivers from changes in the international oil market.
For motorists, the best immediate options were therefore to reduce unnecessary journeys, drive efficiently and shop around for cheaper fuel.
The sharp increase in UK fuel prices showed how quickly international energy markets could affect motorists.
The rise was caused by a combination of factors rather than the actions of one particular group.
Crude oil prices had risen significantly, while refining costs and global supply pressures added further increases. Russia’s invasion of Ukraine then created additional uncertainty in already stressed energy markets.
The government’s 5p-per-litre Fuel Duty cut provided some financial relief, but wholesale prices were rising quickly enough to offset much of the immediate benefit at the pumps.
For drivers, the result was a period of exceptionally high petrol and diesel prices, making fuel economy and careful shopping more important than ever.
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