Recent strengthening of the price of crude oil, priced in US Dollars, together with post-Brexit referendum weakness of the Pound has been blamed for an increase in the forecourt prices motorists and hauliers use in the UK for diesel and petrol.

Motorists’ organization the RAC, has been monitoring UK fuel prices since 2000 and reports that the average increase seen for petrol in May of 6p per liter (£0.06) is the biggest monthly increase it has ever recorded. The rise takes the average price for a liter of petrol to 129.4p with diesel rising to 132.3p following an identical rise last month.

The price for a Barrel of Brent crude twice spiked above the $80 mark in May, representing a 42-month high although it eased back to end the month at $76.44 and is currently trading at $73.41. The highest average petrol price seen in the UK was 142.2p per liter in April 2012 – at that time, the price for a barrel of Brent crude was $119.8. At the time, the conversion rate between Sterling and the US Dollar was $1.3229 – it currently stands at $1.34 flat. Interestingly, at the trough of the oil price, Brent was trading at a shade over $29 (Jan 2016), the UK petrol price dipped to “just” 101.4p per liter! Somebody is making a killing on the price of petrol…

Inevitably, the higher fuel price will put upwards pressure on inflation in the UK and will be another factor that the Bank of England will need to weigh when considering a rise in interest rates. An increase in the interest rate at the next meeting was seen to have become more likely due to a recovery in UK services performance, but inflationary pressure ought to be eased by a rate hike (however, it would not directly affect fuel prices since they are Dollar denominated and linked to the crude oil price).