Motorists face an staggering £1 billion in additional fuel costs due to the Iran conflict, with the total surpassing £920 million last night and expected to reach the milestone today amid the Easter getaway rush.
Average diesel prices climbed to 190.62p per litre yesterday, nearing the 2022 record of 199.09p, marking a 34% rise from 142.38p on February 28. Petrol averages reached 157.71p per litre, up 19% from 132.83p over the same period. Filling a typical 55-litre family car tank now costs nearly £14 more for petrol and £27 more for diesel compared to pre-conflict levels.
Ceasefire Offers Price Relief
Global oil prices dropped 13% to $94.80 (£70.73) per barrel following a temporary US-Iran ceasefire agreement. Experts predict pump prices could fall by about 8p per litre—saving roughly £4.50 per fill-up—if the truce holds and the Strait of Hormuz stays open.
US President Donald Trump agreed to suspend planned strikes on Iran for two weeks, with Tehran committing to lift its Strait blockade to resume oil flows during peace negotiations. Commercial shipping through the Strait has fallen 95% since February 28, tightening supplies and driving up costs. However, oil price changes typically take weeks to reach forecourts.
Government VAT Gains Spark Duty Hike Backlash
The crisis has generated nearly £170 million in extra VAT revenue for Chancellor Rachel Reeves in just over a month from elevated pump prices. Critics urge delaying the planned 5p per litre fuel duty increase set for September 1, which would add £3 to a typical fill-up.
Reeves and Prime Minister Sir Keir Starmer plan to proceed despite pressure to scrap the hike, following examples from other nations cutting petrol taxes amid the turmoil.
Expert Views on Driver Pain
Steve Gooding, director of the RAC Foundation, stated: ‘Whether or not we are on the cusp of meaningful and hopefully long-lasting peace, drivers continue to pay a huge ‘war premium’ at the pumps, and the Exchequer continues to receive tens of millions of pounds from drivers in a VAT windfall it wasn’t expecting. Even if the price of oil begins a sustained drop, it has got a long way to go before reaching the $70 a barrel mark which is where we were just before the conflict started. That means drivers will continue to feel financial pain on the forecourts probably for weeks to come.’
Edmund King, AA president, noted: ‘The conflict has been painful for drivers and hauliers. With the ceasefire now in place, it is hoped fuel prices could fall by around 8p per litre over the coming weeks. However, consumers need an extended period of support following the hike in pump prices. The planned rise of fuel duty starting on 1 September should be delayed to help ease pressure on household budgets and keep costs down, particularly as it hits over the winter when heating and road fuel costs increase.’
Gordon Balmer, boss of the Petrol Retailers Association, added: ‘Falling oil prices are welcome news for motorists and if this trend continues it should be reflected in lower pump prices. However, it is to be noted that this is a temporary ceasefire and the market remains volatile.’
Opposition Criticism
Tories’ shadow transport secretary Richard Holden said: ‘Labour’s fuel duty hike comes at the worst possible time for families already struggling under the weight of this Government’s tax hikes. Britain has been left exposed to the energy crisis by Labour’s Net Zero zealotry and drivers are already in the firing line. Labour should listen to the country and back thought-through Conservative plans to bin the hike to help keep bills down for households, and Get Britain Drilling in the North Sea to secure our fuel supplies.’
Tory shadow transport minister Greg Smith commented: ‘Cars are essential to millions of Brits. Labour’s political choice to hike fuel duty this September is a massive kick in the teeth for so many, not least when other countries are cutting fuel duty amid the crisis. This chancellor and PM need to get a grip, understand the real world, and scrap their fuel duty hikes.’
The RAC Foundation’s analysis used daily consumption data and price changes from February 28, revealing diesel drivers bore the heaviest burden at £676 million extra spent.
