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7 months ago

Rising Petrol Prices Cause Pain at the Pump

After a torrid 18 months for motorists, petrol prices are yet again on the rise. Costs in the UK skyrocketed in February 2022, when Russia invaded Ukraine, and they’ve been temperamental ever since. It’s estimated that it currently costs roughly £82 to fill up the average family car. In this article, we look at what’s causing the fluctuation, how it affects energy prices and what your business can do to save money.

How are Prices Changing?

According to data from Experian, in mid-August 2023, the average petrol price at British forecourts was 149.1p per litre. Within a fortnight, the cost has crept up by 4p, reaching its highest point since February this year. The average diesel price is slightly above 150.6p per litre, its peak since May.

As shown in the graph above, fuel prices fell for several months due to diminishing demand for oil. This is generally attributable to major economies worldwide facing a tough post-pandemic adjustment period, with inflation rates through the roof and businesses struggling.

What Affects Petrol Prices?

There's a close tie between fuel prices in the UK and fluctuations in the cost of crude oil, from which we produce the petrol and diesel we buy at the pump.

Recent weeks have seen a sharp rise in wholesale oil prices thanks to efforts by its producers to limit exports. Prior to the invasion of Ukraine in early 2022, the UK was also heavily reliant on Russian oil. The deterioration of diplomatic relations and the introduction of sanctions from the NATO alliance have effectively severed this supply line.

Saudi Arabia and Russia, key members of the OPEC+ coalition of oil exporters, have drastically scaled back their production by over a million barrels a day. Some Western countries have accused OPEC+ leader Saudi Arabia of intentionally manipulating prices to maintain a high income the country seeks to diversify its economy away from oil, which currently accounts for 90%. Crown Prince Mohammed bin Salman’s highly publicised ‘Vision 2030’ project to economically transform the kingdom with almost a trillion pounds of investment has seen the country build an ambitious mega-city on the Red Sea and bring superstar footballers like Cristiano Ronaldo and Neymar Jr. to the domestic league.

Petrol prices are also heavily influenced by the exchange rate between GBP and USD, as crude oil trades in American dollars. If the pound weakens, fuel costs tends to increase for businesses on British soil. Oil market expert Livia Gallarati has suggested that the international benchmark for oil prices could move above $90 per barrel, which translates to approximately £71.

Will Petrol Prices Rise Further?

Businesses shouldn’t anticipate substantial petrol price increases unless garages and supermarkets decide to take a bigger slice of the pie by boosting profit margins. The price of diesel, however, is always liable to increase through the winter because many European nations rely on diesel to heat their homes.

Petrol retailers collaborate with the UK's competition watchdog, the Competition and Markets Authority (CMA), to allow businesses to track prices in real-time.

Fuel Efficiency Facts and Myths

There are a few ways that money-concious businesses can save money on petrol. Sticking to 56mph, though, isn’t one of them. You may have heard that this is the optimum speed for efficient fuel consumption, but it's actually a myth. According to the RAC, fuel efficiency varies from car to car.

If you've ever sweated through a hot summer day to conserve fuel, you’ll be glad to hear that your suffering wasn’t for nothing. According to the AA, running your car’s air conditioning eats up extra energy and can burn through fuel up to 10% quicker. Rolling down a window is a better alternative, although this can create air resistance that makes your engine work harder at high speeds and use more petrol.

You may have heard that ‘coasting’ (cruising with your gearbox in neutral or the clutch pedal pushed down) can save you money on petrol. Not only is cruising pointless because fuel supply is already cut off when you take your foot off the accelerator, but it’s also dangerous.

Cruise control can make your journeys more fuel-efficient. Many newer models of cars have this function, which allows you to cut out unnecessary acceleration and harsh braking, reducing the workload of your engine and ultimately burning less petrol.

Regularly topping up the air in your tyres and ensuring they stay close to the recommended pressure is a simple way to maximise your fuel efficiency. Under-inflated tyres create extra drag on the road’s surface and result in increased petrol consumption. You can find the appropriate pressure specifications in your vehicle's manual or on the side of one of the door frames.

How are Petrol and Energy Prices Linked?

In the UK, the wholesale electricity market involves generators, using both renewable and non-renewable sources, sell their energy to suppliers. There is constant work in the background to maintain the balance between supply and demand.

According to the National Grid, over 42% of energy consumed by the country in 2022 was generated using from fossil fuels. While this percentage represents a notable portion, it also highlights the trend towards a more sustainable energy mix.

How can Businesses Save Money on Energy?

With energy prices hitting worrying highs and continuing instability in the energy market, many UK businesses are looking for opportunities to cut their bills. At BusinessComparison, we can help compare deals from gas and electricity suppliers, allowing you to find the best energy rates.

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Sam White