UK diesel prices have climbed to 198.32p a litre, within reach of the 199.09p record set in June 2022, as the Iran war keeps disrupting oil supply. Petrol has hit a four-year high of 173.6p, and Bank of England governor Andrew Bailey has warned that sustained high energy prices make it harder to hold off an interest rate rise.
Diesel closes in on the 2022 record
The average UK diesel price stands at 198.32p a litre, according to the RAC motoring body, just short of the all-time high of 199.09p recorded on 25 June 2022 after Russia's invasion of Ukraine. RAC head of policy Simon Williams said the previous record will almost certainly be surpassed over the weekend as retailers pass on higher supply costs.
Petrol has also climbed, averaging 173.6p a litre — its highest level in more than four years, though still below its summer 2022 peak of 191.5p. According to BBC News, Williams said: "there appears to be no end in sight to high prices at the pumps"
Wholesale oil prices swing with the war
Before the Iran war began, Brent crude — the global benchmark for wholesale oil — traded around $70 a barrel, but the fighting pushed it above $120. Prices fell back near $70 in early July after the US and Iran signed a framework deal, then climbed again once peace talks collapsed. According to the Guardian, Brent crude was trading at $105.30 a barrel on Friday, down 1.25% on the day after reports that US and Iranian negotiators were discussing a phased reopening of the Strait of Hormuz.
Analysts say every $10 increase in the oil price per barrel pushes up pump prices by roughly 7p a litre. The conflict has effectively closed the Strait of Hormuz, through which about 20% of the world's oil and liquefied natural gas normally passes, and experts warn shipping through the strait will take time to normalize even if a deal is reached.
Trump's export ban threat meets French pushback
Donald Trump is considering banning US diesel producers from selling overseas, a move that could push UK prices even higher, since the UK and several European countries depend heavily on US diesel. French president Emmanuel Macron said he told Trump the reported 90-day export ban would be bad for the US economy as well as the rest of the world, according to Politico.
Bank of England governor Andrew Bailey told a monetary economics conference in Oxford that the longer high energy prices persist, the harder it becomes to hold interest rates steady. Morgan Stanley now expects the Bank to raise rates in November and February, having previously forecast no hikes.
Sources: BBC News, Business | The Guardian
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