Why are petrol and diesel prices rising again, and will they come down?

The earlier record highs have not returned but prices are moving upwards  (Danny Lawson / PA)
The earlier record highs have not returned but prices are moving upwards (Danny Lawson / PA)

Shell recently revealed strong profits for its third quarter largely thanks to oil prices. The gas and oil giant announced this week that its earnings between July and September were  $6.2bn, a rise from Q2.

Higher oil prices as well as higher margins at its refining plants have contributed to its revenue boost.

“Shell delivered another quarter of strong operational and financial performance, capturing opportunities in volatile commodity markets,” chief executive Wael Sawan said about the profits.

Petrol prices have risen considerably across the country as of late. For the last five months, there’s been a steady increase in costs at the petrol stations.

Although fuel prices had begun to level out earlier this year, Russian and Saudi Arabian production cuts and rising demand from China have led to oil price increases.

This week, the FTSE 100 made gains while the Bank of England decided to keep interest rates at 5.25% for a second month. All of this has an impact on petrol and diesel pieces around the country. So, how long will this volatility last and what has caused the inflated prices? Here’s what we know.

Why are petrol prices rising?

The rise in the price of petrol is caused by a number of factors.

Firstly, Russia and Saudi Arabia, two leading oil producers, have cut production, accelerating the depletion of global inventories.

Secondly, an increased demand for flights and fuel across the US, Europe, and China has led to further supply reductions.

The leak in Finland and the Hamas situation in Israel are also causing discontent and concern in the market.

Following reports, in October UK wholesale gas prices jumped to their highest level yet since February this year.

How much does fuel cost now?

The average price of petrol is now £1.54 a litre and diesel £1.62.

According to Confused.com, the highest price for petrol today being charged by some UK stations is £1.85.

In August, the price of petrol was averaging £1.49 per litre.

Has the Russian invasion of Ukraine affected fuel prices?

Oil and fuel prices were high before the Russian invasion of Ukraine in 2022 and the war has exacerbated the situation, as Russia is one of the world’s largest crude oil exporters, second only to Saudi Arabia.

In an April 1, 2022 address, President Biden said: “Putin’s invasion of Ukraine has driven up gas prices and food prices all over the world.”

In January 2023, the UK imported no coal, oil, or gas from Russia, and has been finding alternative sources for fossil fuels. The EU is also reducing its reliance on Russian fossil fuels, causing stronger demand for output from other suppliers and pushing up their prices.

In March, Chancellor Jeremy Hunt announced he was extending the 12-month 5p cut to fuel duty introduced by Rishi Sunak a year before when he was chancellor.

Will prices come down?

The Organization of the Petroleum Exporting Countries said in September that the market is facing a deficit that could potentially cause the most significant petrol shortage in more than a decade.

The International Energy Agency (IEA) also warned earlier in the month that the supply cuts made by Russia and Saudi Arabia posed a substantial threat to the continued price volatility.

In line with these, prices aren’t expected to come down significantly in the near future.