June 18, 2018

Fuel Prices Suffer Record Rise In May – What To To Next?

UK Drivers Facing Record Fuel Price Increases

Prices at UK fuel pumps suffered a record 6p a litre rise in May, following their highest increase in 16 months, and are hovering at near four year highs.

The price rises have been fuelled by rising global oil prices caused by political tensions around the world which has seen oil hit as high as $76 a barrel.

Both unleaded petrol and diesel rose by around 6p per litre in May, according to the RAC’s Fuel Watch service – the sharpest rise in 18 years.

Diesel increased by 6.12p – from 126.27p to 132.39p – the second worst rise since the start of 2000. As a result the cost of a tank of diesel for a family car became £3.37 more expensive at £72.81.

Unleaded meanwhile, increased from 123.43p to 129.41p, taking the cost of filling up a 55-litre family car to £71.18 – an increase of £3.29 in just one month.

The RAC Fuel Watch data also shows the average prices of both petrol and diesel have gone up every single day since 22 April, adding 8p a litre in the process – the longest sustained price increase since March 2015.

What is causing this fuel price increase?

Forecasters say two forces have combined to produce a ‘double whammy’ affect at the pumps.

The first is a surge in the price of oil on global markets from $67 to over $76 a barrel.

Political tensions in the Middle East, particularly around US attitudes to the current nuclear deal with Iran, are helping stoke up prices, amid fears of a cut in supplies.

At the same time, following the Brexit decision to leave the EU, the pound has now fallen by a further 2% against the US dollar, and at the time of writing was just £1 to $1.33.

As oil prices are quoted in dollars, this immediately impacts on the prices we in the UK pay for fuel imports.

The dramatic rise in the cost of fuel is clearly demonstrated by the four big supermarkets, which sell the largest volumes and therefore buy fuel in more quickly than other retailers, but which have raised their prices even more steeply.

In May, the big four raised petrol by 5.49p a litre and diesel by 5.88p while motorway, service stations added 6.37p to unleaded, taking it to 144.75p a litre, and 6.69p to diesel making it an eye-watering 147.80p a litre – 15p a litre above average UK prices for both fuels.

diesel cars

Controlling fuel costs

With fuel prices clearly on the increase again, the onus is on fleet managers to look at measures to ensure that fuel costs, the second largest cost on the fleet after depreciation, are kept under control.

One way to manage rising fuel costs is to encourage drivers to use supermarket forecourts when refilling, as prices here are typically lower than the oil companies’ branded sites, often by several pence per litre. Even now, they are still cheaper than branded fuels.

Another tried and trusted solution is to introduce a corporate fuel card which provides an accurate measure of a company’s fuel expenditure, as well as allowing the introduction of a number of management controls and more detailed reporting.

Reducing the need for business travel

Arguably, the most effective way to reduce fuel costs is to cut the volume of journeys made. Allowing people to work from home reduces mileage, using online or phone-based meeting technologies instead of moving people to sites reduces the need for travel.

Where travelling is unavoidable, the driver has a big influence on a vehicle’s fuel consumption.

Encourage efficiency driving techniques

Eco and efficiency driver training, which teaches drivers techniques for using their right feet rather less enthusiastically and anticipating road hazards rather than driving up to them, have been shown to clearly reduce fuel consumption and costs. CLM has produced a useful guide to efficient driving techniques which is available to all to download here.