Robin, Customer Success Manager at The Fuel Store, shares his insights into the factors impacting fuel prices, including his predictions for fuel costs as we head into next week.

The price you pay for petrol and diesel at the pumps is governed by wholesale fuel prices. Wholesale prices are influenced by a range of factors, including supply, demand and pricing for crude oil, 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.

Factors influencing fuel pricing this week

This week, oil and fuel prices experienced fluctuations, with underlying tensions in the Middle East and OPEC+ actions driving market volatility. 

At the start of the week, oil prices dipped slightly despite escalating geopolitical risks, largely due to robust global supply levels. 

OPEC oil production plans 

OPEC+ looks likely to delay the planned increase in oil production by a month or more, due to ongoing concerns about low demand, falling prices and rising supply. The group was scheduled to raise output by 180,000 barrels per day in December – a delay already postponed from October. This shift came amid reports that oil prices could reach $60 per barrel by early next year if geopolitical tensions continue.

Middle East tensions 

As the week progressed, oil prices rose as tensions spiked.

Mid-week, oil prices rose roughly 3% following news of Iranian missile strikes on Israel, an escalation that raised fears of further disruptions. Oil prices rose further today, (Friday) after reports that Iran was preparing a retaliatory strike on Israel from Iraq in the coming days. Such instability fuels concerns that a targeted strike on Iran’s oil infrastructure could impact Iranian oil production and export routes. 

Although markets remain wary, there has been little long-term impact on prices so far due to global oil inventories. 

Fuel duty 

In the UK, the decision to maintain the fuel duty freeze has brought a sense of stability to fuel markets, offsetting some of the concerns related to Middle East tensions. 

Next week’s fuel prices

We predict the market will continue to trade stably heading into next week.

Alarms continue to sound across Israel – and it’s expected that Israel will not hesitate to widen its military offensive to hit Iran directly. An Israeli attack on Iranian oil production or export facilities could cause significant disruption. 

The market is likely to stay stable over the coming weeks if OPEC increases production this winter as planned, which would counterbalance any immediate disruptions caused by escalating conflicts in the Middle East​. However, with a decision due from OPEC in the coming days, this is yet to be seen. 

There is also a possibility that the outcome of the US election will have an impact on oil prices, as Harris and Trump hold differing views on Iran and Russia, two major oil producers.

Businesses and drivers can reduce costs further by opting for a fuel card. In 2023, customers of The Fuel Store saved an average of 12 ppl off forecourt costs. 

Robin, Customer Success Manager at The Fuel Store, shares his insights into the factors impacting fuel prices, including his predictions for fuel costs as we head into next week.

The price you pay for petrol and diesel at the pumps is governed by wholesale fuel prices. Wholesale prices are influenced by a range of factors, including supply, demand and pricing for crude oil, 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.

Factors influencing fuel pricing this week

The market has been relatively steady this week, with a slight dip compared to this time last week. 

Early in the week, oil prices fell after news broke that Israel had killed Hamas leader Yahya Sinwar. Reports say an Israeli tank struck a building in Gaza, which held several armed men, leading to rising tensions. Meanwhile, demand concerns, especially from China, continued to weigh on oil markets.

However, as the week went on, oil prices began to climb. Focus turned to the Middle East after a failed drone attack on the Israeli Prime Minister’s residence. According to Israeli state broadcaster KAN, an unnamed official shared that Prime Minister Benjamin Netanyahu and Defense Minister Yoav Gallant are set to decide the timing and approach for Israel’s next steps in a Security Cabinet meeting later today.

Investors continue to await Israel’s response to a missile attack by Iran on Oct. 1, which could involve strikes on Tehran’s oil infrastructure. The U.S. reportedly obtained leaked documents detailing Israel’s plans for retaliatory actions, with President Joe Biden indicating that he is aware of the timing and details of Israel’s planned response. Iran has warned it will react “decisively” to any such moves. 

Towards the end of the week, oil prices rose by over 1% as geopolitical tensions in the Middle East—a key oil-producing region—stirred market concerns. Traders are also closely watching developments in ceasefire negotiations in Gaza. Meanwhile, Israel launched strikes on Iranian targets in Damascus, Syria. 

Fuel duty and the autumn budget 

Looking ahead, there’s growing speculation that the government may announce an increase in fuel duty next week. For context, fuel duty is a tax charged on each litre of fuel sold, and it’s a key component of the overall price at the pump. Currently, UK fuel duty is set at a flat rate per litre, and any increase would directly impact the cost of petrol and diesel across the country.

At The Fuel Store, we’re actively monitoring the potential for this duty increase, as it could affect the costs of the services we provide to you. Our goal is to help you manage any added expenses as seamlessly as possible. We’re also exploring different strategies to mitigate the impact, including options that may reduce costs or improve efficiencies across fuel-related expenses.

If an increase does occur, we’ll work closely with you to navigate the change. Rest assured that we’re committed to keeping you well-informed as soon as new details become available. In the meantime, our team remains available to answer any questions you may have.

Next week’s fuel prices

Looking ahead, we expect the market to trend slightly higher into next week.

Businesses and drivers can reduce costs further by opting for a fuel card. In 2023, customers of The Fuel Store saved an average of 12 ppl off forecourt costs. 

Robin, Customer Success Manager at The Fuel Store, shares his insights into the factors impacting fuel prices, including his predictions for fuel costs as we head into next week.

The price you pay for petrol and diesel at the pumps is governed by wholesale fuel prices. Wholesale prices are influenced by a range of factors, including supply, demand and pricing for crude oil, 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.

Factors influencing fuel pricing this week

At the start of the week, oil prices rose due to ongoing concerns over the conflict in the Middle East, and the potential impact of disruptions in oil production. These geopolitical tensions initially supported higher prices as traders anticipated potential supply shocks. However, as the week progressed, several other factors combined to bring down.

The influence of OPEC’s oil market demand outlook

On Monday, OPEC revised its global oil demand growth outlook for 2024 and 2025, projecting lower demand than previously expected. China accounted for the bulk of the 2024 downgrade as OPEC reduced its growth forecast for the country, after data for the first nine months of the year showed a 3% fall in imports. Declining Chinese oil demand is attributed to the growing adoption of electric vehicles (EV), as well as slowing economic growth.

The impact of China’s economic slowdown

The Chinese economy has been facing persistent challenges and – as a major driver of global oil demand – the challenges are impacting global oil forecasts. China’s oil imports fell for the fifth consecutive month this month, signaling a slowdown in industrial activity and domestic consumption.
Additionally, China’s government stimulus measures (which were highly anticipated when first announced) have failed to inspire confidence among investors, leading to concerns over sustained low demand growth. This has further dampened oil prices, overshadowing market fears about potential supply disruptions from the Middle East.

Ongoing tensions in the Middle East

Concerns over the possibility of Israeli retaliation against Iran’s October 1 missile attack briefly saw oil prices rise. However, these fears did not materialise into immediate supply disruptions. With tensions ongoing, traders were watching the situation very closely – with particular focus on potential Israeli attacks on Iranian oil infrastructure, and military reinforcements from the US (an effort to stabilise the region, calming some of the immediate fears of a broader conflict). Biden has publicly opposed an Israeli strike on Iran’s nuclear and energy infrastructure, which, if carried out, could have major implications for global oil supply and push prices higher.

By the end of the week, geopolitical fears had eased somewhat, reducing upward pressure on prices.

Other market pressures

Another factor contributing to the market’s downward trend is the global shift toward cleaner energy sources. As countries, including China, implement policies to reduce reliance on fossil fuels and promote renewable energy, the demand for oil continues to face long-term pressure.
The U.S. dollar hit a nine-week high on Monday. A stronger dollar makes oil, which is priced in U.S. dollars, more expensive for international buyers using other currencies. This tends to lower global oil demand, further pushing prices down.

At the same time, U.S. crude oil stockpiles were expected to have risen last week, according to a preliminary Reuters poll, while distillate and gasoline inventories likely fell. These shifts in stockpile data provide insights into supply and demand – particularly as winter approaches and demand for oil typically increases – and are being closely monitored by traders.

Next week’s fuel prices

In summary, this week’s initial price spike due to geopolitical tensions has now eased, following the release of updated economic forecasts from the International Energy Agency (IEA) and OPEC, pushing prices back down.

Looking ahead, it is expected that the market will stabilise going into next week. Continued monitoring of the Middle East and Chinese demand will remain crucial. 

Prices have risen this week, compared to the same time last week. Prices fluctuated throughout the week, with volatility driven, once again, by a combination of geopolitical events, economic concerns, and weather-related events.

With prices higher than last week, Robin, Customer Success Manager at The Fuel Store, shares his insights into the factors impacting fuel prices, including his predictions for fuel costs as we head into next week.

What determines fuel prices?

The price you pay for petrol and diesel at the pumps is governed by wholesale fuel prices. Wholesale prices are influenced by a range of factors, including supply, demand and pricing for crude oil, 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.

Factors influencing fuel pricing this week.

Middle-East tensions cause prices to rise

The week began with a significant rise in oil prices. Escalating tensions in the Middle East pushed the price of a barrel above $80 for the first time since August. There is growing concern that the conflict may continue to escalate – not only putting Iran’s oil production at risk – but creating further disruptions to regional supply.

Historically, geopolitical crises in oil-producing regions, particularly in the Middle East, tend to push prices upward as markets anticipate supply disruptions or heightened risks in transportation routes like the Strait of Hormuz.

Prices fall due to concerns over the Chinese economy

Mid-week, prices experienced a pullback due to renewed concerns over the health of China’s economy, the world’s second-largest consumer of oil. Despite recent speculation about Beijing introducing a major economic stimulus package, the absence of any substantial spending commitments led to disappointment among traders.

China’s economy is a key driver of global oil demand, and any indication of slowing growth or weaker economic policy initiatives can quickly reverse market sentiment.

Hurricane Milton impacts demand

By Thursday, prices stabilised and edged higher. Hurricane Milton, the fifth-most-intense Atlantic hurricane on record, caused widespread disruption in Florida. Around 25% of the fuel stations in the state ran out of gasoline, creating a sudden spike in demand for crude oil which pushed prices higher. Speculation of a fall in demand across the state in the aftermath further fuelled volatility.

Weather-related supply chain interruptions often lead to short-term spikes in fuel prices, as seen in this case.

Next week’s fuel prices

Looking ahead, we predict that prices will continue to rise next week. This is due to ongoing geopolitical concerns in the Middle East. Despite no immediate military retaliation from Israel as some had expected, the threat of escalation remains. Israeli Defense Minister Yoav Gallant has stated that the decision on a potential attack on Iran will rest with Prime Minister Benjamin Netanyahu and another member of the Security Cabinet, which leaves the market on edge. News breaking today (11th Oct) states that Gulf states are lobbying Washington to stop Israel from attacking Iran’s oil sites because they are concerned their own oil facilities could come under fire. Traders often respond preemptively to such geopolitical risks, fearing potential supply disruptions that could arise if the conflict spreads or intensifies.

In summary, this week’s market movement highlights the sensitivity of oil prices to a variety of external factors, from geopolitical tensions and economic data to natural disasters. While prices have fluctuated, the general trend remains upward, driven by fears of escalating conflicts and supply chain disruptions. These factors, along with underlying concerns about global economic health, suggest that volatility will persist in the coming weeks.