Falling international oil prices have in recent months led to significant reduction in fuel prices, with the RAC predicting at one point that they may even fall below the £1 per litre mark. Motorists have naturally welcomed lower fuel prices, but now it seems that the cost of running a vehicle is once again set to rise.
The drop in oil prices – and consequently in petrol and diesel prices at the pump – hit in late summer last year and continued through the winter. Motorists have had time to become fairly acclimatised to more affordable running costs. However, new figures have revealed that, for the past four months, prices have been slowly but steadily creeping upwards and could soon increase further to surpass the levels seen before the slump.
Fuel costs hit their low in February, with a litre of petrol costing 106p from the average pump. A litre of diesel cost 113.29p at the time of the February low point. However, the RAC has revealed that by the middle of this month, the price had crept back up to 117p for a litre of petrol or roughly 121p for a litre of diesel. This reflects recovering crude oil prices. Oil cost as little as US$45 per barrel at the start of this year but have crept up to a little over US$62 now.
Another motoring organisation, the AA, released data last month showing that the rise in prices has led to a reduction in fuel sales. Based on information from HM Revenue & Customs, the organisation reported that March experienced the lowest ever level of petrol consumption even though prices were still significantly below pre-slump levels.
So far the price rise, while a disappointment to motorists, is little more than a recovery from the slump. However, it seems that prices could continue to increase through the remainder of the year, perhaps surpassing pre-slump prices significantly. The International Energy Agency recently issued a report in which it was predicted that the rest of of 2015 will see an increase in demand for crude oil at a rate “faster than previously expected.” If this predictions move true, higher demand is likely to translate into higher oil prices, which in turn translates into a continued rise in the price of fuel.
Concerns on the impact that this might have on motorists’ budgets are compounded by fears that the freeze on fuel duty could soon reach an end. Rates were frozen for almost the entire tenure of the previous parliament, and before the general election the Conservative Party promised it would remain this way for a while yet. However, there have been some reports suggesting that duty may be pegged to inflation, allowing rates to be increased on the basis that they are remaining frozen “in real terms.”