Ukraine crisis: An increase in oil prices is inevitable

The average price of petrol jumped to £1.51 a litre on the Sunday following Russia’s attack on Ukraine, while diesel increased to £1.55.

Why will the Ukraine crisis affect UK prices?

Petrol price movements in the UK are mainly determined by the price of crude oil, and the exchange rate between the dollar and the pound, because fuel, like oil is traded in dollars.

Although the UK imports just 6% of its crude oil from Russia, it is affected by global wholesale prices rising.

Since the attack, oil prices have surged, with Brent breaching more than $100 a barrel for the first time since 2014.

Prices at the pump: what we can expect

Long queues were reported the weekend following the attack, with some forecourts running dry as motorists stocked up before future rises.

During 2020, oil consumption was reduced as drivers stayed home. Low consumption kept the price of Brent oil low. However, in 2021, as the economy picked up, prices went from $54 to $78 by the year end.

In January prices rose to $85. While Brent is at $100 we can expect to see pump prices at around 158.5ppl (VAT inclusive).

Added cost of biofuel element

The situation in Ukraine isn’t the only reason for the price rise at the pumps. There is added cost from the increasing proportion of biofuel in the calculation of a litre of fuel.

The Renewable Transport Fuel Obligation (RTFO) details what percentage of a litre of fuel needs to be produced from renewable sources (biofuel). In 2021, the bio element was calculated using a figure of 9.93%, but from 1 January this is now 11.72%.

Until 2032, the bio element (for calculation purposes) will keep growing each year.

With families facing higher household fuel bills, many drivers may be hoping for help in the budget.

Sarah Coles, personal finance analyst for Hargreaves Lansdown, suggested the government could help with the rising costs, as "40% of the overall cost of petrol is fuel duty and 17% is VAT.

"However, aside from announcing another fuel duty freeze – which has become something of an annual tradition – it’s highly unlikely to step in to protect motorists.

"More of us are having to give serious thought as to how we use our cars, and how we can cut back on fuel."

Ukraine oil crisis