UK fuel prices are set to rise after the pound fell to its lowest level against the US dollar since 1985, the Petrol Retailers Association (PRA) has warned.
“The double impact of the pound weakening against the US dollar and global oil prices strengthening will cause pump prices to move sharply upwards,” said Brian Madderson, chairman of the PRA.
Consumers and businesses can expect to see pump prices go up by 5p a litre by the end of the month unless there are favourable corrections to the exchange rate and to global oil prices, Madderson added. This will also increase UK inflation rates.
The current national average pump price is 113p for petrol and 114p for diesel.
Delving further into the reasons behind the likely increase, Madderson explained:
“The pound has now fallen by over 15% to $1.24 since the pre-Brexit level of $1.47 and dropped even more alarmingly last week to just $1.15 in the ‘flash’ trading which started in Asian markets. Fortunately it recovered quickly but there are City analysts talking about even lower levels to come including parity with the US dollar.
“At the same time, renewed talks amongst OPEC members trying to curb oil production has led to a hardening of global oil prices with Brent Crude passing the psychological barrier of $50/barrel.
“As a result, Platts wholesale costs to retailers have increased by over 6ppl (pence per litre) for petrol and 7ppl for diesel in the last few weeks, whereas the UK average pump prices have moved up by less than 2ppl for both grades over the same time period.”
In an effort to keep fuel prices as low as possible, the PRA has written to Chancellor Philip Hammond, urging him to reduce fuel excise duty in his Autumn Statement from 57.95ppl to 55.00ppl.
“This would be an extremely popular and valuable contribution to ensuring consumer spending does not start to fall away and damage business prospects as the new Government grapples with the aftermath of Brexit,” Madderson said.