UK motorists experienced the fastest monthly fall in diesel prices since 2000 with the cost plunging by 17p a litre in June, according to motoring group RAC.
When the US-Israel war with Iran began on 28 February, fuel prices surged as the conflict severely disrupted the production and transportation of energy across the Middle East.
However, since the US and Iran agreed to a framework deal to end the fighting in June, prices have nosedived.
Motoring group the AA has said it expects pump prices to fall further and added that “the timing is perfect for the start of the summer holidays”.
Meanwhile, the RAC has said prices are “still some way off” where they were before the Iran war.
How do wholesale oil prices affect the cost of petrol and diesel at the pump?
Crude oil is a key ingredient in petrol and diesel, which means that higher wholesale costs make filling up a car more expensive.
Analysts say every $10 (£7.53) increase in the oil price pushes up pump prices by roughly 7p a litre.
Since the war began, the price of a barrel of Brent crude – the global benchmark for wholesale oil prices – has been very volatile.
Before the conflict, Brent was about $70 a barrel, but the conflict saw it peak at above $120.
Since the framework deal was signed, the price has dropped back down to around $72 a barrel.
What has happened to petrol prices in the UK?
According to the RAC, the average price of petrol reached an Iran war peak of 159.53p a litre on 28 May, while diesel’s highest average price during the conflict was 191.54p a litre on 15 April.
Since then, prices have tumbled. Over the month of June, the RAC said the average price of diesel sank from 183.75p a litre to 167.14p a litre.
The average price of petrol dropped from 159.37p a litre to 151.40p a litre over the same period.
However, the RAC said prices are still much higher than before the conflict began when average petrol prices were 132p a litre and average diesel prices were 142p a litre.
The RAC’s head of policy, Simon Williams, said: “As things stand, petrol should dip under 150p soon and diesel ought to get to below 160p, but we would need the price of oil to fall further to see a return to the pre-conflict prices.”
Despite the conflict, petrol and diesel prices remain below the levels reached in the summer of 2022 following Russia’s invasion of Ukraine, when petrol reached 191.5p a litre and diesel hit 199p.
Because transporting oil is a slow process, price movements in the wholesale markets take about a fortnight to show at the pump.
Fuel retailers have denied accusations of price gouging during the conflict. The official markets regulator said it had “not seen evidence of retailers actively changing their pricing strategies to take advantage of the crisis”.
A government scheme called Fuel Finder lets drivers compare the cost of fuel offered by petrol stations across the UK.
Luke Bosdet, the head of policy at the AA, said the group had been surprised at the speed that prices had fallen and put it down to the scheme.
On 20 May, Prime Minister Sir Keir Starmer said a planned 5p increase in fuel duty due in September would be postponed until 31 December because of the conflict.
Why has the Iran war had a big impact on oil prices?
The Middle East conflict sent global oil prices soaring as it effectively closed the Strait of Hormuz – one of the world’s key water transport routes for oil, liquid natural gas and other essential commodities – limiting global supplies.
About 20% of the world’s oil and liquefied natural gas normally passes through the waterway.
Despite the deal between the US and Iran, experts warn a return to normal levels of shipping through the Strait of Hormuz will take time, and the impact of the war will continue to affect the global economy for potentially months to come.
Where does the UK get its oil and gas?
The UK is heavily reliant on oil and gas imports, with the majority coming from the US and Norway.
The price of oil on the global market determines how much the UK pays for it.
Although the UK does get some oil from the North Sea, most of that is exported for refining elsewhere.
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Reporting by Faarea Masud, Alex Daniel, Michael Race, and Mitchell Labiak
