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Oil breaks $80 a barrel: what it means for petrol prices

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Cars queuing at a BP service station at Wetherby Services - PA
Cars queuing at a BP service station at Wetherby Services - PA

Drivers have been told to brace for higher prices at petrol pumps just as the nation is gripped in a fuel crisis, following a surge in the price of oil.

Brent crude oil has hit $80 (£59) a barrel for the first time in nearly three years. Oil prices could reach $90 by the end of the year as global demand picks up following a pandemic slump, according to analysts at investment bank Goldman Sachs.

It is likely to result in prices rises in a matter of days, experts have said.

Petrol prices have already reached 135.3p a litre, their most expensive for eight years. The average cost of diesel now stands at 136.9p.

Simon Williams of the RAC said the situation would only get worse. “When it comes to pump prices, it’s a pretty bleak picture for drivers.

"We are aware of a small number of retailers taking advantage of the current delivery situation by hiking prices [already]," he said.

What is causing the increase?

Brent crude prices fell to as low as $16 a barrel when the pandemic first struck, forcing major parts of the global economy to grind to a halt. But the oil price has recovered, as the above charts shows.

International demand for oil is on the march as economies across the globe start to bounce back from the pandemic and once again fire up their factories and machinery.

The European energy crisis which has resulted in wholesale gas prices hitting their highest ever level due to lack of supply has resulted in industries opting to use oil instead, increasing demand further still.

At the same time stocks are low. Efforts from Russia and the oil cartel Opec to boost supply have failed to halt the rise in prices, which analysts say is yet to hit its peak.

What does it mean for fuel prices?

The price of oil is directly linked to the cost of wholesale fuel with crude used in the production of both petrol and diesel. When oil prices rise for a sustained period, wholesale fuel prices tend to follow.

Pump prices change when there are significant and sustained increases or reductions in the wholesale price of petrol or diesel. There is a very short lag before retailers pass these costs onto drivers.

Prices have already started to rise, though are not yet troubling the record books. Unleaded prices hit a record high of 142.5p a litre on average in April 2012, while the cost of diesel was 147.9p per litre

Where can I get the cheapest fuel?

Supermarkets often have better deals on fuel, as they cut headline costs to lure shoppers into their stores. Drivers can save more than 3p a litre on unleaded at supermarkets, compared to the UK average, according to the AA breakdown service.

Supermarkets also offer vouchers for fuel discounts at checkouts and point-based loyalty schemes which can be used to buy petrol or diesel.

Similarly, credit card companies offer cash back incentives when you spend in certain shops, which can include fuel pump companies, as well as supermarkets, creating an indirect saving.