The RAC is predicting steep pump price increases, and potentially record highs next year, after the price of a barrel of oil climbed to January 2020 levels, with some analysts predicting prices could hit $80 this year as pandemic restrictions ease.
However, with oil now at around $64 a barrel, UK fuel price increases have been moderated because of the stronger pound to dollar exchange rate ($1.39 compared with $1.30 in January 2020), as oil is traded in US dollars. This means any weakening of the pound or further increases to the oil price are very likely to lead to higher prices.
Having dropped to just $13 last April, the price of a barrel of oil has now recovered, jumping by $20 in the past three months. With some analysts predicting oil could reach $80 a barrel this year, a price last seen in October 2018, the RAC predicts petrol prices could rise to around 130ppl and diesel to 134.5ppl based on today’s exchange rate remaining constant.
At $100 a barrel – a price that JPMorgan has said is a possibility next year – petrol and diesel could hit record highs of 143ppl and 148ppl respectively (previous highs were in April 2012 – petrol 142.48ppl and diesel 147.93ppl).
RAC Fuel Watch data shows that petrol prices have already been risen for 13 straight weeks, with a litre now 8.03p more expensive on average than 22 November 2020 at 121.84ppl. For diesel with prices have risen for 14 weeks (up 7.68ppl since 15 November 2020) at 124.91ppl.
RAC fuel spokesman Simon Williams said: “When the pandemic hit last year, the effect on forecourt prices was nothing if not dramatic – those still driving through March and April paid less to fill up than they had done since mid-2016, when the price of oil plummeted as a result of deliberate over production.
“But by the summer the oil price had rebounded and today is at a level not seen since the start of 2020. As economic confidence grows as measures to combat the coronavirus take effect, it’s likely to mean drivers end up paying more to fill up in the coming weeks.
“With the Chancellor’s Budget now less than two weeks away, the last thing drivers, and possibly the economy, need is a fuel duty increase – not least as petrol prices have now been rising for 13 consecutive weeks. A hike in duty at a time of rising fuel prices could put unprecedented pressure on lower-income households and might have the negative effect of forcing everyone who depends on their cars to consider cutting back on other spending.”