UK drivers are starting to see significant savings at the pumps as fuel prices continue to fall following the easing of tensions in the Middle East.
According to our data, supermarket diesel prices are now 9.5ppl lower than at the start of June, saving motorists around £5.70 on a typical 60-litre fill-up.
Unleaded prices have also fallen, with supermarket unleaded now averaging 4.4ppl less than at the beginning of the month.
The national average price of fuel now stands at 153.9ppl for unleaded and 174.0ppl for diesel, while supermarket prices are even lower at 151.9ppl for unleaded and 170.9ppl for diesel.
The latest reductions mark a substantial turnaround from the highs seen earlier this year. In mid-April, average pump prices peaked at 158.7ppl for unleaded and 192.3ppl for diesel as fears of a prolonged disruption to global oil supplies pushed wholesale costs sharply higher.
For drivers filling a 60-litre diesel tank, today’s prices represent a saving of around £12.84 compared with April’s peak.
Diesel
Unleaded
Fuel prices still higher than before the conflict
Despite recent declines, motorists are still paying considerably more than before the US-Iran conflict escalated.
Prior to the outbreak of hostilities, average UK prices stood at 132.3ppl for unleaded and 141.8ppl for diesel, meaning fuel remains significantly more expensive than it was earlier in the year.
The reason prices have not fallen further is that wholesale fuel markets are still working through months of disruption to global supply chains and fuel inventories.
Oil prices fall below $80 per barrel
Falling wholesale fuel costs and a sharp decline in crude oil prices have driven the recent reductions at UK forecourts.
Brent crude, the international benchmark used to price much of the world’s oil, has now fallen below $80 per barrel for the first time since early March.
Oil prices surged above $114 per barrel during the height of the conflict after the US carried out strikes against Iran and Tehran responded by closing the Strait of Hormuz to commercial shipping. The waterway is one of the world’s most important energy transit routes, handling a significant proportion of global crude oil and refined fuel exports.
Since then, markets have steadily become more optimistic that supplies will return to normal.
In mid-June, Brent crude fell to around $86 per barrel after both the US and Iran announced an agreement aimed at ending hostilities and reopening the Strait of Hormuz. Prices continued to slide over the following days, reaching $79.58 per barrel as traders became increasingly confident that the risk of major supply disruptions had eased.
Markets welcome US-Iran agreement
The biggest driver behind falling fuel prices has been growing confidence that a lasting peace deal is now within reach.
For weeks, investors were reacting to conflicting statements from Washington and Tehran, with reports of progress often followed by renewed threats or military activity. That uncertainty kept a risk premium embedded in oil prices.
However, over the weekend both sides announced that a deal had been agreed and would be formally signed on Friday.
The agreement is expected to lead to the reopening of the Strait of Hormuz and the gradual restoration of crude oil and refined fuel exports from the region.
While analysts caution that it could take several months for supply chains and shipping networks to normalise fully, the agreement has significantly reduced fears of an immediate supply shortage.
Major investment banks have already responded by cutting their oil price forecasts. Several now expect Brent crude to average around $75-$80 per barrel over the coming quarters as additional supplies return to the market.
What could happen next?
The outlook for drivers has improved considerably compared with just a few weeks ago.
Lower crude oil prices and falling wholesale fuel costs should continue to feed through to forecourts over the coming weeks. Diesel prices, which rose particularly sharply during the conflict due to concerns over global middle-distillate supplies, may have further room to fall if wholesale markets continue to ease.
However, fuel markets remain sensitive to developments in the Middle East. Any setbacks to the peace process or delays in reopening shipping routes could quickly reverse some of the recent gains.
For now, though, the direction of travel is positive, with motorists finally seeing some of the savings from lower oil prices reach the pumps.
Oil price is almost back to what it was before 28 February, but don’t expect forecourts to reflect this. Neither can we expect prices to drop in supermarkets due to it being cheaper to restock shelves, greed WILL prevail!
Until the spivs and shysters are removed from the commodity and futures markets we will always be shafted. Greed is king unfortunately.