Diesel prices reach record of over £1.80 a litre

UK diesel prices rose to a record of just over £1.80 a litre as efforts to stop importing fuel from Russia pushed up costs for retailers, the RAC said.

After the previous record of £1.79 was set in March following the Russian invasion of Ukraine, prices dipped but have risen again in recent weeks.

The RAC said petrol prices went up by nearly 3p a litre since the start of May and were £1.66 a litre on average.

It said if EU members agreed to ban Russian oil, prices could rise further.

The EU has been focusing for weeks on how to wean itself off Russian energy and has plans to phase out Russian crude oil over six months.

However, countries are split on how soon they wind down dependence - Hungary has rejected the proposal as unacceptable and the Czech and Slovak governments want a transition period.

The UK is not as dependent on Russian oil as the EU is, however, almost a fifth of all UK diesel consumption was provided by Russian imports in 2020.

The UK is also affected when global prices rise, despite its plans to stop Russian oil imports by the end of the year.

"Efforts to move away from importing Russian diesel have led to a tightening of supply and pushed up the price retailers pay for diesel," said RAC fuel spokesman Simon Williams.

"Unfortunately, drivers with diesel vehicles need to brace themselves for yet more pain at the pumps."

In recent weeks, fuel sales have fallen as drivers have cut back on the number of journeys they make due to higher pump prices

Petrol station operator Ascona Group, which owns 60 UK petrol stations, said the amount of fuel it sold had dropped by 200,000 litres a week compared to pre-pandemic levels.

Managing director Darren Briggs said customers were making £20 to £30 fuel purchases "last a little bit longer".

The Office for National Statistics revealed last week that the UK's economy shrank by 0.1% in March and said higher prices, including those at the petrol pumps, were "really beginning to bite".

The downturn came ahead of the impact of higher energy bills in April, which has sparked fears from analysts that the UK economy is at risk of a recession - defined as the economy getting smaller for two consecutive three-month periods - later this year.

Cutting diesel imports is tough

Analysis by Ben King, BBC business reporter

Cutting energy imports from Russia is a vital part of the West's plan to put the squeeze on the Putin regime and its war machine.

But when it comes to diesel, it's particularly tough - not least for the UK.

Diesel is produced by refining crude oil, and before the war, much of the UK's diesel supply was made in Russia and shipped to Britain in tankers.

Diesel supplies across the world were low before the crisis began, and the uncertainty surrounding the latest round of EU sanctions is helping to push those prices higher.

Most European countries are already reducing their imports of Russian oil and diesel - and imports from the Middle East and elsewhere are taking up some of the slack. But securing those extra supplies means paying higher prices.

The latest figures from the data firm Vortexa showed that just over half Europe's diesel imports were still coming from Russia.

And the Asian head of the major oil trading firm Vitol, Mike Muller, warned earlier this month that EU rules which came into force on Sunday could make trading with Russia even harder, for instance by making it impossible to pay Russian suppliers.

That's not likely to mean pumps running dry in the UK, says analyst Neil Crosby, who follows the diesel market for OilX.

"The UK itself may manage more or less to get by, but retail prices are not liable to cool any time soon," he said.

In a bid to curb rising fuel prices, Chancellor Rishi Sunak cut the fuel duty by 5p a litre after previous record prices were seen in March.

The RAC said then the cut was "a drop in the ocean" and now claimed drivers would be better off if had Mr Sunak reduced VAT on fuel.

"Had Mr Sunak reduced VAT to 15% as we called on him to do instead of cutting duty by 5p, drivers of diesel vehicles would be around 2p a litre better off, or £1 for every full tank," Mr Williams said.

"As it is, drivers are still paying 27p VAT on petrol and 29p on diesel, which is just the same as before the Spring Statement."

The Treasury said it had introduced the "biggest ever cut to all fuel duty rates - worth £5bn when taken together with the fuel duty freeze".

"It will save the average UK car driver around £100, van driver around £200 and haulier over £1,500, based on average fuel consumption," a statement said.

The government said businesses in general pay VAT on their sales but recover the tax on their purchases, meaning many can reclaim any VAT incurred when buying fuel.

The price of Brent crude oil - the global benchmark for prices - has soared in recent months after Russia's invasion of Ukraine raised concerns of potential global supply issues.

Ahead of the invasion, fuel prices had already been rising after demand increased following the reopening of economies from coronavirus lockdowns.