There is growing concern in Wales and across the UK as the price of filling your car continues to go up and up, despite a fuel duty cut being put in place by the UK Government earlier this year and increased anger from drivers. In recent weeks, the price of fuel has crept above the £2 per litre mark in more than one location in Wales.
At Swansea West services, run by Moto and located off junction 47 of the M4, and at Pont Abraham service station in Carmarthenshire, run by Euro Garages, the price of both unleaded and diesel has been over £2 per litre in recent weeks - a significant jump compared to costs earlier in the year.
At the end of March, diesel at Pont Abraham was 199.9p with petrol at 191.9p. Two months prior to that, diesel was being sold at 166.9p, with petrol at 165.9p. On Tuesday (June 28), diesel was 208.9p and petrol was at 206.9. In simple terms, the cost of both diesel and petrol at the fuel station at the western end of the M4 has risen by more than 40p per litre since the start of the year. You can get more traffic and travel news and other story updates straight to your inbox by subscribing to our newsletters here.
Read more: What it's really like at Pont Abraham services, which some call 'appalling'
As of Tuesday, the average price of unleaded petrol across supermarket and independent forecourts in the UK is 191.1p per litre, according to the RAC. Just three weeks ago it was 178.5p. Diesel too has increased to an average of 198.96p per litre. Three weeks ago it was 185.2p. To put the latest figures into context, the prices three weeks ago were already record highs for the average cost per litre.
The cost of filling up one's car was described as a “national crisis” in the first week of June, and things have only got worse since. RAC fuel spokesman Simon Williams last week: “With the oil price falling and wholesale costs down over the last week, pressure is mounting on the biggest retailers to turn the tide and put petrol pump prices into reverse. It now seems we’ve reached the current petrol peak, so we expect to see the big four supermarkets start to cut their prices. As they dominate UK fuel retailing this should lead to others reducing their prices too which will benefit drivers everywhere.”
However, he did add: “The situation with diesel is different unfortunately as wholesale prices last week still put it on course to move closer towards an average of £2 a litre. If, however, oil continues to trade lower it could just prevent this from becoming a reality.”
This week, fuel retailers have been accused of a “classic example of rocket and feather pricing” as the cost of petrol rose again. The concept of 'rocket and feather pricing' for fuel involves retailers quickly hiking pump prices when the cost of oil rises, but being slow to pass on the benefits of decreases in oil prices, with the RAC saying that significant reductions in wholesale costs for petrol meant companies had a “clear opportunity” to stop continuously hiking pump prices. You can read more about that here.
In the face of some criticism from motorists, petrol station bosses in Wales have hit back by outlining just how much profit they make from each sale at the pump. One business in Pembrokeshire explained that a £100 sale of diesel at 193.9p per litre accounted for 51.57 litres of diesel — with a 4p-per-litre profit that leaves £2.06 for the filling station. And if the £100 is paid using a credit card, the card firm charges £1.69 in interest for the transaction. That leaves the garage with 37p — and that is before taking out overheads such as electricity, maintenance and wages. You can read the full details of that cost breakdown here.
So, why are petrol and diesel prices so high?
Oil prices are rising because it is more in demand, something which has not been helped by the ongoing conflict in Ukraine after Russia’s invasion in February. Companies are cutting ties with Russia - the world’s third biggest supplier of oil - and according to the RAC, how much we pay at the pump is mainly affected by:
- the global price of crude oil
- supply and demand for crude oil
- oil refinery production and capacity
- the pound to dollar exchange rate, as refined fuel is sold in US dollars per metric tonne
- distribution costs
- the margin fuel retailers decide to take
- fuel duty charged by the Government, currently 52.95p a litre
- VAT charged at the end of every forecourt fuel transaction, currently at 20%
Higher oil prices mean higher petrol and diesel prices at the forecourts, but a “significant amount” of what we pay is tax. According to the RAC: "The total proportion of tax we pay to the treasury varies depending on the pump price. For instance, with fuel at 120p a litre at the pumps, 65% of the cost is tax. But at £1 a litre it rises to 75%, meaning 75p in every litre sold goes to the treasury. Fuel duty raises more than £26bn a year, which together with VAT charged on fuel, vehicle tax and ‘showroom’ tax totals, means motorists contribute more than £40bn a year to the Government’s coffers.”
The huge amount of tax paid every time we fill our cars up does not fully explain why some garages charge such different amounts per litre than others, however. Attempts to glean some answers from Euro Garages, which manages the Esso petrol station at Pont Abraham, have so far proved unsuccessful.
A spokesperson for Moto Hospitality, which runs the fuel station at Swansea West services, said: “We recognise fuel prices are higher than customers would like. The fuel price includes several elements, including oil price and taxation. Fuel prices at motorway service areas reflect a number of factors. At Moto, it’s been our ambition to find a way of lowering motorway fuel prices sustainably and to make a significant difference to what motorists pay on motorways. We are currently looking to achieve this with our digital fuel sign roll out which will enable us to cut prices by 15p a litre, bringing us in line with the high street. Digital fuel signage roll-out is in progress for Moto Hospitality sites at Leigh Delamere East and West and Lancaster North and South. Moto plans to roll the signage out to all sites across the UK in future.”
Why is diesel now similar in price to petrol?
According to AutoExpress, the influx of cheap diesel from countries like Saudi Arabia has pushed the price of this fuel, which has always traditionally been a significant amount more expensive than petrol, closer to that of unleaded. But the magazine says the fact we get a higher percentage of diesel from Russian than petrol, will swing the pendulum the opposite way.
What are the experts saying?
With regard to the current situation in Wales and across the UK, there are calls for more to be done to ensure that fuel prices for drivers do not spiral further out of control. Simon Williams, RAC fuel spokesperson, said: “With analysts predicting that oil will average $135 a barrel for the rest of this year drivers need to brace themselves for average fuel prices rocketing to £2 a litre which would mean a fill-up would rise to an unbelievable £110. The oil price is rising due to increased demand for fuel across the world as China eases its Covid restrictions and America and Europe go into the peak summer driving season. All this combined with a weaker pound at $1.2 means wholesale fuel costs more for retailers to buy.
"The wholesale price of diesel is fast approaching 160p a litre which, when you add 7p retailer margin and 20% VAT, would take the pump price over the £2 mark. We strongly urge the Government to take drastic action to help soften the impact for drivers from these never-before-seen pump prices.”
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