Yahoo Finance Petrol to hit £2.50 per litre and diesel £3, experts warn MPs
Petrol prices could hit as high as £2.50 per litre in the UK and diesel could soar to £3 per litre as Russia’s invasion of Ukraine keeps pushing oil prices, MPs have been told.
Amrita Sen, director of research at Energy Aspects, told the Treasury Committee that Britons can expect the current trend at the pump to continue as long as crude prices climb.
“Crude oil prices are currently around $110, we are saying it could easily go up by $50 — so let’s say it’s just over a 50% increase — that’s how much fuel prices would go up.”
Asked by MPs if she saw petrol rising to £2.40 a litre, she said: “Yes, around that much.”
The scenario is even more dire for diesel as industry demand will ensure that prices keep climbing.
“Even when consumers, let’s say you and I don’t fill up our cars and we run or cycle, it’s that industrial usage that can keep diesel [prices] high. Absolutely, £2.50, even closer to £3 depending on how high oil prices get. That is definitely within the realms of possibility,” she said.
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The only way to tackle these soaring prices would be if the government moves to cut VAT on fuel, something motorist group RAC is already pushing for.
Business secretary Kwasi Kwarteng announced last week that the UK will phase out the import of Russian oil and oil products by the end of the year.
UK fuel prices broke new records over the weekend, as the surge in crude prices pushed up costs.
The average cost of a litre of petrol at UK forecourts hit 163.5p on Sunday, up from 148p per litre a month ago, according to data firm Experian Catalist.
Diesel hit 173.4p per litre, up from 151.6p last month.
The drop in crude prices in the last week has not yet reached the forecourts, but prices could start to fall soon.
RAC fuel spokesman Simon Williams said the average price of petrol “appears to be on a collision course with £1.65 a litre”:
The price hikes seen over the weekend are still a result of the oil price rise which began at the start of the month and peaked early last week.
“As the oil price has now fallen back, we should hopefully reach the peak and start to see prices going the other way to reflect the big drop in wholesale costs seen at the end of last week, subject to no further spikes in the barrel price this week.”
Also giving evidence at the Treasury select committee, Nathan Piper, head of oil and gas research at Investec, said consumers need to prepare for even more price hikes.
Read more: UK set to ban Russian oil imports
“Consumers need to get ready for what could be continuing increases in fuel price,” he said.
He also warned that energy bills in October are set to double from already record highs. The price cap for the average energy bill will jump by £693 in April.
“The input price there is 126p per therm and the current price is 225p so the bills in October are going to go up again and by quite a margin. What you will see is actually a doubling in people’s energy bills year-on-year," Piper said.
Sen estimates that the government would have to spend millions if it wanted to soften the blow for UK families.
"We calculated that the price cap versus where currently our price forecast is for NBP [gas] and (...) the difference you [government] would potentially have to subsidise households is anything between £30bn to £62bn more”
The energy expert added that she is seeing banks restricting borrowing and lending, removing liquidity from the markets. Despite saying this is not as bad as the 2008 great financial crisis, "it is step one", he said.
