Fuel Price Pulse – 4th October

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Oil prices have risen above $76 a barrel this week, due to fears that supplies could be disrupted. However, prices remain lower than levels seen earlier this year, and well below the peak of $130 a barrel that followed Russia’s invasion of Ukraine in 2022.

 

With prices higher than last week, Robin, Revenue and Retention 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 prices this week: 

With prices higher this week than last, we explore the factors influencing recent price fluctuations: 

Middle East Tensions 

At the start of the week, oil prices were slightly lower, but concerns about potential conflicts in the Middle East heightened midweek. A dramatic escalation in hostilities between Iran and Israel further added to worries on Tuesday, when Iran launched a ballistic missile attack on Israel. 

Markets reacted with a sharp 3% rise in oil prices due to fears of further escalation. Investors are now concerned about Israel’s potential retaliation, especially targeting Iranian oil infrastructure. In an off-the-cuff statement, US President Joe Biden said that his administration has been “discussing” possible Israeli plans to attack Iran’s oil industry – triggering a further spike in oil prices. As the world’s 7th largest oil producer, any disruption to Iran’s oil supply is a significant concern for global fuel costs. 

OPEC production 

OPEC’s recent decision to halt its gradual increase in oil production has added another layer of uncertainty to the market. By constraining supply, OPEC is driving up prices amid growing global demand. Financial institutions had already anticipated a shift to $60 per barrel in the coming months, even before the latest geopolitical developments. This OPEC policy signals that supply could worsen if the geopolitical crisis leads to further disruptions.

5% rise in oil prices 

Prices have spiked by 5% since the beginning of the week – showing that the oil market is highly reactive to any news concerning potential supply chain disruptions. 

Next week’s fuel prices

We predict the market will trade higher next week. 

Overall, the combination of geopolitical risk, OPEC’s production constraints, and market anxiety is expected to keep fuel prices rising as the week progresses. 

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. 

Ready to find out how a fuel card can save you money? Speak to our team or explore our range of fuel cards here. 

 

 

 

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 purposes.