Why UK fuel prices are so high
Britain has some of the most expensive fuel in Europe. Much of that has nothing to do with oil markets. More than half of what you pay at the pump is tax, collected before a single drop goes into your tank. Understanding the breakdown helps you see why even when crude oil prices fall, pump prices barely move.
The breakdown of a 135p litre of petrol
At a typical pump price of 158p per litre (national average, April 2026), there are four main components. Fuel duty is a flat-rate levy charged per litre, currently 52.95p, reduced from 57.95p in March 2022. VAT at 20% is then applied to the total price including the duty, adding roughly 26p per litre. The remaining ~79p covers the wholesale cost of crude oil, refining, transportation, and the retailer's margin.
The retailer margin is typically just 4–8p per litre at supermarkets, rising to 10–15p at branded forecourts. This means the biggest beneficiary of high pump prices is the Treasury, not the filling station.
The VAT on duty problem
One aspect of UK fuel taxation that often goes unnoticed is that VAT is charged on the duty itself. When duty rises, so does the VAT collected on it, meaning the government effectively taxes its own tax. At current rates, roughly 8.8p of the VAT element is tax applied to duty rather than to the underlying fuel cost.
When oil markets spike, retailers pass the cost on immediately. When oil falls, retailers are slower to reduce prices, a pattern documented by the Competition and Markets Authority. Duty and VAT mean the floor is very high regardless.
How prices have changed since 2020
The pandemic caused a brief collapse in demand that briefly drove petrol below 100p per litre in 2020. The recovery, combined with supply disruptions from the Russia-Ukraine conflict, pushed prices to a record high of around 191p in July 2022. Prices dipped to around 133p by early 2025 before rising again to the current level of around 158p, driven by renewed supply pressures and a weaker pound against the dollar.
The global factors you can't control
Crude oil is priced in US dollars, so a weak pound always pushes UK pump prices higher, even if the oil price itself hasn't moved. In 2022, sterling fell sharply against the dollar which amplified the oil price spike. Supply decisions by OPEC+ (the cartel of oil-producing nations) also directly influence wholesale costs. When OPEC+ cuts production, crude prices rise and UK drivers feel it within days.
- Crude oil price: set on global markets, influenced by OPEC+ output decisions and demand forecasts.
- Exchange rate: a 10% fall in sterling adds roughly 5–6p to the cost of a litre of petrol.
- Refinery capacity: tightness in European refining adds to wholesale costs.
- Logistics: transport from port to forecourt adds around 2–3p per litre.
You can't change duty, VAT or oil markets. Choosing the right station makes a real difference. Prices within 5 miles of each other often vary by 8–20p per litre. At today's prices that can mean over £100 per year in savings. Use PumpItDown to find the cheapest near you.