Fuel Price Pulse – 29th August

We share our insights into the factors impacting fuel prices, including predictions for fuel costs as we head into next week.

What determines fuel prices?

Wholesale fuel prices determine the price of petrol and diesel at the pump. They are influenced by a range of factors, including crude oil supply, demand, and pricing, oil refinery production levels, the pound-to-dollar exchange rate, socio-economic and political factors that might impact production/demand, the margin (profit) taken by fuel retailers, and fuel duty and VAT charged by the Government.
 
Fuel prices this week:
 
Oil markets are trading higher this week, driven by a combination of U.S. sanction threats on Russian oil, a steep new tariff on Indian imports, and rising military tensions in Ukraine. With Russian strikes damaging key infrastructure in Kyiv and Ukrainian drones hitting oil refineries, the pressure on global supply chains is growing. That could mean UK drivers need to brace for high fuel prices at the pump.

Why are oil prices climbing?

US Sanctions 

Oil prices climbed early in the week on the back of renewed geopolitical tension. Markets had been awaiting news of fresh U.S. sanctions on Russian oil, with President Trump warning of punitive measures if peace talks fail within two weeks. While U.S. Vice President Vance suggested that Russia had shown signs of compromise, most analysts remain unconvinced. Ongoing instability can impact prices.

A new 50% tariff on Indian imports has also taken effect. This is intended to penalise Delhi for buying discounted Russian crude since the outbreak of the Ukraine war. With India one of the largest consumers in Asia, this policy shift could further tighten global supply chains, pushing prices up.

Air strikes on refineries disrupt supply 

Tensions escalated further when President Putin was accused of sabotaging peace hopes after air strikes severely damaged the EU headquarters in Kyiv. The retaliation was swift: Ukraine launched drone attacks on two Russian oil refineries, sparking fears of disruption in global crude output.

Supply and demand 

While worries about supply have dominated, a two key factors have helped to stabilise prices. OPEC+ is accelerating output hikes to regain market share, lifting the supply outlook. Seasonal demand is also easing – the U.S. summer driving season, which supports global fuel demand, is winding down with the Labor Day holiday. At the same time, U.S. crude inventories showed a larger-than-expected draw, pointing to strong industrial and freight demand. 

What this means for fuel prices

All eyes will be on the outcome of peace negotiations in the coming fortnight. If sanctions are implemented or further attacks on energy infrastructure occur, oil prices could rise further, leading to higher petrol and diesel costs across the UK. For now, while markets are edging higher rather than spiking – but markets (and pricing) remain volatile. 

General factors that influence oil and fuel pricing:

While geopolitical tensions can cause market uncertainty – especially in oil-producing regions such as the Middle East and Russia – global economic performance can slow demand and impact prices. 
Oil is traded in U.S. dollars, so dollar fluctuations impact oil prices. A stronger dollar and fluctuations in exchange rates make oil more expensive in other countries, potentially lowering demand. 
Seasonal factors like winter heating and summer cooling demand can also increase oil consumption and pricing. 
 
Please speak to our team for more information on fuel card pricing, including advice on how to save time and money on fuel management. 
 
The information provided in this post is for information only. It does not constitute financial advice. Pricing predictions are speculative and should not be relied upon for forecasting.