Diesel cost 'up £10 a tank' on year ago - RAC report

Rising fuel prices mean drivers of petrol cars are paying an average £8 more to fill up than they were a year ago, with diesel customers forking out £10 more.


And, according to the RAC's latest Fuel Watch data, prices are set to continue going up with motorists already facing the highest bills for 18 months.

It found that, unusually, supermarkets imposed the biggest rises last month despite using fuel as a means of attracting customers.

The report charted an impact on fuel costs from rising oil prices, as major producers begin production cuts aimed at raising the cost of Brent crude.

Oil costs started to fall sharply in the summer of 2014 - hit by poor demand and over-supply.
Image Caption:Brent crude remains almost half the price it was in 2014

They continued to be depressed as the OPEC cartel of oil-producing nations moved to protect its market share from the flood of cheaper shale oil being extracted in the United States - forcing many shale firms out of business.

A barrel of Brent crude touched $27 in January but it has since recovered to $56 - driven by OPEC nations, and others, initiating their first agreement since 2001 to grow prices by cutting output.

That price growth has combined with the collapse in the value of the pound, of up to 20% against the dollar since the Brexit vote, to inflict further pain on drivers because oil is priced in dollars.

Fuel has been one factor behind the recent rise in the annual rate of inflation to a two-year high amid warnings, especially from retailers, that consumer costs are only going to increase further this year because of sterling's weakness.
Image Caption:Fuel prices are determined by oil prices and currency movements

The RAC said unleaded cost 117.23p a litre on 29 December and diesel 119.63p having been 114.24p and 116.56p a litre respectively at the beginning of the month.

Diesel tends to be slightly more expensive because of weaker refining capabilities.

The motoring group measured a 4p a litre rise in wholesale fuel costs for both unleaded and diesel since the end of November when OPEC announced its production cut.

RAC fuel spokesman Simon Williams saw further rises in the pipeline because of that market intervention.

He said: "Everything now depends on the strength of the deal and each country sticking to the agreed production levels.

"Russia will be of particular interest as it is currently producing at near record levels.

"We are optimistic that prices will not increase by another 3p a litre in January based on what's going on with oil and wholesale fuel now, but if in the months ahead the barrel price was to get nearer to $60 and the pound was to weaken further then that would be the worst possible combination for motorists.

"Our current forecast for the next two weeks is for petrol to be around the 118p mark and for diesel to go up to around 121p a litre."