The recent events in the Middle East are expected to have an immediate impact on fuel prices, leading to higher costs at the pump. Since Saturday, the average price of petrol has increased by nearly 2.5p per liter, while diesel has gone up by over 3p. There have been reports of prices surging by 11p per liter in certain areas, prompting drivers to rush to refuel as a precaution.
Oil prices have already risen to over $82 per barrel, with warnings from the AA that further pump price hikes are likely in the coming weeks. FairFuelUK predicts a possible increase of 5p to 10p per liter in the near future. Despite the rise in prices, the current fuel costs were relatively low, with petrol averaging 131.9p in February. The situation hinges on developments in the Gulf and the duration of any potential conflict.
The closure of the vital Strait of Hormuz, responsible for shipping around a fifth of the world’s oil and gas, has caused concern in global markets. Approximately 14 million barrels of supplies per day have been disrupted, impacting oil prices. While there are substantial stockpiles available, prolonged disruptions could lead to a significant oil price increase.
Consumer confidence may suffer from higher fuel prices, affecting household budgets. Calls have been made to Chancellor Rachel Reeves to scrap a planned fuel duty rise in the autumn, as fuel duty is expected to generate £24 billion this financial year. The ripple effects of rising oil prices extend beyond fuel prices to impact various sectors, including food prices and transportation costs.
While households may face challenges due to escalating fuel prices, oil giants like BP and Shell have seen their shares rise following the events. Additionally, Russia stands to benefit economically, as disruptions in the Strait of Hormuz could divert demand towards Russian oil, potentially boosting President Putin’s revenue amid the conflict in Ukraine.