The cost of diesel at the pump has continued to rise as the government's weekly fuel prices show the increase is currently more than 1ppl per week.
The price is now almost 1.80ppl – increasing by 1.3ppl in a week – as the impact of the fuel duty cut in the Spring Statement has been cancelled out by other factors. The price is almost 50ppl more than this time a year ago.
It also follows uncertainty around the price of Brent crude, which is currently at around $113 a barrel, as global geo-political factors and volatility in financial markets has impacted.
The fuels started hitting record prices in late March, rising even further in recent days and weeks as the cost of living crisis continues.
Why is diesel so expensive?
TLDR: Volatility in the market, a move towards EV technology and Ukraine
With Russia having launched a full-scale invasion of Ukraine and facing international sanctions, there’s potential for significant disruption to supplies. Russia produces 4.5 million barrels of oil each day, and only Saudi Arabia produces more.
The sanctions levied against Russia so far have targeted banks and oligarchs rather than the country’s energy sector, but factors such as Germany’s postponement of the Nord Stream 2 gas pipeline will have an effect on the energy market overall. Russia also has the ability to reduce oil exports to Europe in a tit-for-tat response to economic sanctions, and experts suggest Saudi Arabian oil fields could struggle to increase production sufficiently to counter such measures.
“OPEC is already struggling to meet its output targets as demand for crude rebounds following the easing of lockdown restrictions. This has pushed up prices, with analysts warning there is limited capacity to increase supplies if flows from Russia are affected by sanctions,” the Financial Times newspaper has reported.
After recent price fluctuations, partially as a result of COVID, reinvestment within the petro-chemical industry is at an all time low and is unlikely to increase as most see the writing on the wall with a move away from Internal Combustion towards the EV revolution.
Investing in expensive infrastructure for a diminishing market is unlikely.
Continued high prices for some time
TLDR: High prices likely to continue for the near future at least.
Experts predict high fuel costs will be with us for the foreseeable future, and it’s not just down to the crisis in Ukraine - energy costs have been high for the best part of a year already as demand surged as the world emerged from lockdown.
Part of the problem is down to the fact that relatively low barrel prices in recent years have put plans to drill for new reserves on hold. That’s true in Africa, the US and South America, and while the current high prices may increase interest in exploring new reserves, it can take years for new wells to come on stream in volumes required to affect the market.
Luke Bosdet, the AA’s fuel price spokesman, called the latest price rises a “milestone of misery”. He added:
There is still quite some variation in pump price among fuel stations in most areas and between many towns. It is particularly galling when supermarkets of the same brand are charging significantly more at one superstore compared to another not that far away.
In the meantime, hauliers continue to struggle with the fuel price at the pump.