UK drivers pay some of the highest fuel prices in Europe. When you fill up your car, over half of what you pay goes straight to the government in tax. The rest depends on global oil prices, refining costs, and how much your local station marks up.
This guide explains exactly where your money goes and why prices feel so stubbornly high.
The short answer: tax
On a litre of petrol costing 130p, approximately 75p is tax. That's 58% of the total price before the retailer even factors in the cost of the fuel itself.
For a full breakdown, see our guide to UK fuel duty and tax.
Global oil prices
The non-tax portion of the pump price is dominated by crude oil costs. Oil is traded globally in US dollars, so two factors matter:
- Brent crude price — the benchmark for North Sea oil. When this rises, so do pump prices.
- GBP/USD exchange rate — a weaker pound means oil costs more in sterling, even if the dollar price hasn't changed.
OPEC production decisions, geopolitical tensions, and global economic conditions all move oil prices. These factors are entirely outside UK control.
Refining costs
Crude oil must be refined into petrol and diesel. Refining capacity has tightened globally since 2020 — several refineries closed during the pandemic and haven't been replaced.
The "crack spread" (the margin between crude oil and refined product) has been elevated since 2022. This means even when crude oil prices fall, refining costs can keep pump prices high.
Diesel refining has been particularly affected, which is why diesel is now consistently more expensive than petrol. Petrol vs diesel prices explained →
Retailer margins
The retailer's margin is typically the smallest component of the pump price — around 5–10p per litre. This covers rent, staff, equipment, and profit.
However, retailers in less competitive areas can charge more because drivers have fewer alternatives. This is why fuel in rural and motorway service stations is significantly more expensive than in towns with multiple competing stations.
The CMA (Competition and Markets Authority) has investigated fuel retail margins several times, noting that the "rocket and feather" effect — prices rising quickly but falling slowly — costs UK drivers an estimated £900 million per year in excess charges.
Why prices don't fall when oil drops
Because over half the pump price is fixed tax, changes in oil prices have a muted effect at the pump. A 10% drop in crude oil only translates to about a 3–4% drop in pump price.
On top of that, retailers are slow to pass on reductions. The "rocket and feather" effect means:
- When wholesale costs rise → pump prices increase within days
- When wholesale costs fall → pump prices decrease over weeks
Supermarkets typically pass on savings fastest. Branded forecourts can lag by 2–4 weeks. Compare supermarket vs branded fuel prices →
What you can actually do about it
You can't control oil prices, exchange rates, or government tax policy. But you can control which station you fill up at. The price difference between the cheapest and most expensive stations in any area is typically 10–15p per litre. On a full tank, that's £5–8.
- Compare prices by postcode before filling up
- Find cheap petrol near you — practical tips
- Time your fill-ups for modest extra savings
- Track price trends to know if prices are rising or falling
You can't change the price, but you can find the cheapest station
Enter your postcode to see the 5 best-value stations near you. Updated throughout the day from government data.
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