Fuel Price Pulse – 22nd November

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?

Wholesale fuel prices govern the price you pay for petrol and diesel at the pumps. 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

Fuel prices are currently higher than this time last week.

At the start of the week, oil prices were relatively steady. However, as the week went on, prices began to rise due to escalating tensions between Russia and Ukraine. 

On Tuesday, Ukraine used ATACMS missiles supplied by the US to strike Russian territory for the first time. Russia described this as a serious escalation by the West, with Russian President Vladimir Putin warning that the threshold for a possible nuclear strike had been lowered. 

By midweek, oil prices had climbed nearly 2% as the conflict intensified. Both countries launched missile attacks, raising concerns about potential disruptions to global oil supplies if the situation worsens. On Thursday, Putin announced that Russia had launched a hypersonic missile at a Ukrainian military target and issued a stark warning to the West. He threatened to target military installations in any country supplying weapons to Ukraine.

As the world’s second-largest oil exporter after Saudi Arabia, Russia plays a critical role in the global oil market, and any major supply disruptions could have significant impacts. These developments have shifted the market’s attention to the heightened risk of a broader escalation in the war, which could further strain global oil supplies. As a result, oil prices are expected to remain under upward pressure into next week.

While geopolitical tensions are pushing prices up, data from the American Petroleum Institute (API) and Energy Information Agency (EIA) showed higher-than-expected inventories, indicating that supply currently outpaces demand. However, this surplus has not calmed the market, due to speculation about further supply disruptions. Speculation is also mounting that OPEC+ may delay planned output increases when it meets on Dec. 1, adding further uncertainty to the market.

Next week’s fuel prices

We predict that fuel prices will rise next week, driven by the escalating war in Ukraine and concerns about potential disruptions to Russia’s energy infrastructure. The market’s attention will likely remain on OPEC+ deliberations and the unfolding geopolitical crisis. Any significant developments in these areas could amplify price volatility.