We share our insights into the factors impacting fuel prices, including predictions for fuel costs as we head into next week.
What determines fuel prices?
Wholesale fuel prices determine the price of petrol and diesel at the pump. They are influenced by a range of factors, including crude oil supply, demand, and pricing, oil refinery production levels, the pound-to-dollar exchange rate, socio-economic and political factors that might impact production/demand, the margin (profit) taken by fuel retailers, and fuel duty and VAT charged by the Government.
Fuel prices this week:
Fuel prices: What’s Happening at the Pump?
Oil markets have remained relatively stable this week, with prices on track for slight weekly declines. However, fuel markets remain on edge as escalating geopolitical tensions threaten to drive prices sharply higher. For UK motorists, that means continued volatility at the pump – and the potential for significant price increases if global events worsen over the coming days.
UK and US Sanctions on Russia
US threatens secondary sanctions
President Trump has threatened sweeping secondary sanctions on Russia unless a ceasefire in Ukraine is reached within 50 days. The President has expressed frustration with President Putin’s intensified attacks and is preparing to send further military aid to Ukraine. If the U.S. enforces sanctions on third-party buyers of Russian oil, many countries and companies may be forced to pull back from importing Russian crude, even if they currently rely on it. This would reduce global oil supplies, creating a supply crunch, which typically pushes prices up sharply.
EU sanctions on Russian oil
The EU has introduced its toughest sanctions yet on Russian oil, lowering the price cap to well below market value and blacklisting over 100 shadow fleet tankers to restrict exports. Bans on refined fuel imports and pipeline transactions have been put in place. These sanctions aim to tighten enforcement and reduce Russia’s oil revenues – increasing the risk of global supply disruptions and higher fuel prices.
Supply and demand
Drone strikes add to supply concerns
Drone strikes in Iraq’s Kurdish region have also significantly disrupted oil production. The attacks, which are believed to be linked to Iran-backed militias, have slashed output from 280,000 barrels per day to just 130,000. Prices briefly spiked by $1 earlier in the week as traders responded to the news, which could impact global supplies and, in turn, edge prices up.
OPEC Production Increase May Fall Short
All eyes are also on OPEC, with a long-anticipated production boost due in two weeks. However, analysts warn that it will fall short of current global demand, particularly in light of the disruptions in Iraq and broader geopolitical instability. This imbalance between supply and demand could place additional upward pressure on crude prices as global sanctions begin to take effect.
Tariff turbulence from the U.S.
Meanwhile, the U.S. tariff deadline on global energy exports is less than two weeks away. Countries are working hard to negotiate reduced-tariff deals to avoid steep penalties, adding another layer of uncertainty to pricing.
Tariffs create uncertainty in global trade, which can rattle markets and indirectly affect oil prices. If trade tensions escalate, especially involving major energy importers or exporters, we could see oil price volatility increase. That instability often pushes wholesale fuel prices up as supply chains are disrupted.
Looking ahead – oil and fuel prices next week
Despite the relative calm this week, the fuel outlook for UK drivers is anything but settled. Wholesale prices have held steady, for now, but market dynamics suggest that could change quickly. If sanctions tighten, OPEC underdelivers, or Middle East tensions escalate further, UK pump prices may begin to rise before the end of the month.
General factors that influence oil and fuel pricing:
- While geopolitical tensions can cause market uncertainty – especially in oil-producing regions such as the Middle East and Russia – global economic performance can slow demand and impact prices.
- Oil is traded in U.S. dollars, so dollar fluctuations impact oil prices. A stronger dollar and fluctuations in exchange rates make oil more expensive in other countries, potentially lowering demand.
- Seasonal factors like winter heating and summer cooling demand can also increase oil consumption and pricing.
Please speak to our team for more information on fuel card pricing, including advice on how to save time and money on fuel management.
The information provided in this post is for information only. It does not constitute financial advice. Pricing predictions are speculative and should not be relied upon for forecasting.