Petrol and diesel prices have risen substantially in recent weeks. Research from Experian has calculated that petrol currently costs an average of 149.1p per litre at UK forecourts. This means that in the last two weeks alone, its price has shot up by more than 4p, marking the highest price for almost six months. Meanwhile, diesel costs an average of 150.6p per litre – a price not seen since the end of May.
This price rise has been caused by the rising cost of the raw material used to make petrol and diesel: crude oil. In the last month alone, crude oil prices in Europe have increased by 6.86 per cent.
In the coming weeks, the costs of crude oil and natural gas are expected to rise further. Nishita Sharma comments on what is causing a price surge of hard commodities used to make fuel:
“Firstly, in recent weeks, there has been a sharp rise in crude oil prices. This has largely been driven by production cuts in two of the world’s largest oil producers – Saudi Arabia and Russia. On 3 August, Saudi Arabia announced to extend its unilateral production cut of additional 1 million b/d, first announced for July 2023, until the end of September and signalled that it could be extended or deepened further. In July, Saudi Arabia’s production declined by 970,000 barrels per day (b/d) Month-over-Month (MoM), reaching 9 million b/d – representing a two-year low level. Meanwhile, Russia pledged to cut its exports by 500,000 b/d in August and by 300,000 b/d in September.
“Prices are anticipated to continue on their upward trajectory throughout August due to a projected tight supply caused by the continuation of the aforementioned production cuts. The total volume of production cut by OPEC+ will likely amount to ~5 million b/d (5% of global supply) during August–September. Further, OPEC, in its July monthly oil market report, revised the oil demand growth forecast to 2.4 million b/d in 2023, an increase of around 90,000 b/d from its June estimate.
“Diesel and petrol prices are intrinsically linked to crude oil prices. In July, European diesel increased because of the rise in the cost of crude oil. However, another factor to consider when examining rising diesel and petrol prices is the time of year. A seasonal uptick in demand from the transportation sector in summer, alongside an increase in manufacturing and trade activities, has put upward pressure on prices.
“Finally, although natural gas in Europe prices fell by 9.1 per cent MoM in July due to above average inventories and rise in supply of Russian gas via TurkStream into Europe, this trend is not expected to continue.
“Natural gas prices may rise in the weeks ahead as Europe is expected to experience extreme weather in its northern and southern regions, leading to a boost in demand for the commodity as it is used for cooling homes and buildings. Elsewhere, planned maintenance is expected at three key natural gas sites in Norway over the coming weeks: the massive Troll gas field, the Vesterled pipeline, and the Kollsnes gas processing plant. The potential risk of strikes at three major LNG facilities in Australia could disrupt ~10% of global LNG supply. This is anticipated to increase energy cost which can influence diesel and petrol cost.
“The impact of these price rises is already being felt by consumers at the pump. As the cost of crude oil continues to rise, petrol and diesel prices are surging as a consequence. In turn, this is having a sizeable impact on holidaymakers travelling up and down Britain’s roads, who are already under significant pressure from the ongoing cost of living crisis.”