The average price of a litre of diesel in the United Kingdom has reached an all-time high of 199.18 pence, according to the RAC motoring body. The increase comes as the US-Israel war with Iran continues to drive up fuel costs, the BBC reported.

The previous record for diesel prices was 199.09p, set on June 25, 2022, following Russia's full-scale invasion of Ukraine, according to the BBC.

Detail and Numbers

The current average price of 199.18p per litre was reported by the RAC, which noted that diesel prices have entered "uncharted territory." Since the conflict between the USA and Iran began at the end of February, the cost of diesel has risen by 59p a litre, an increase of just under 40%, according to the RAC.

Filling an average family car with diesel now costs £110, which is £31 more than at the start of the conflict, the RAC stated. The RAC's data is based on average prices from supermarkets, motorway service stations, and independent retailers.

Petrol prices have also risen to an average of 174.13p a litre, the highest in more than four years, according to the BBC. However, this remains below its peak of 191.5p recorded during the summer of 2022. Petrol prices are 41p per litre more than at the start of the conflict, the RAC added.

Before the Middle East conflict, the average price of petrol was 132.83p per litre, and diesel was 142.38p, the BBC reported.

Context and Background

The US-Israel war with Iran has severely disrupted the production and transportation of wholesale oil across the region over the past seven months, leading to a surge in the price of fuels made from crude oil, according to the BBC. The conflict in the Middle East has restricted the flow of both crude oil and refined diesel onto global markets, the RAC said.

The price of Brent crude, a global benchmark for wholesale oil prices, has been highly volatile since the war began, the BBC reported. Before the Middle East conflict, Brent crude was trading at just over $70 a barrel. The fighting saw it peak at above $120. In early July, prices fell back to near the $70 mark after the US and Iran agreed to a framework deal to end the fighting. However, prices climbed again after peace talks collapsed and are now above $100 a barrel, with the RAC reporting it is hovering at around $108 per barrel.

Crude oil is a key ingredient in both petrol and diesel, meaning higher wholesale costs directly increase prices at the pump, the BBC noted. Analysts say that every $10 per barrel increase in the oil price pushes up pump prices by roughly 7p a litre, according to the BBC.

Further limiting supply, Russia has implemented an export ban on diesel following attacks on its refineries by Ukraine, the BBC and RAC reported. Diesel is also harder to refine than gasoline, and demand is difficult to reduce because it is used by the haulage industry and in agriculture, the RAC added.

The UK is heavily reliant on oil and gas imports, with the majority coming from the US and Norway, according to the BBC. While the four refineries in the UK produce enough petrol to meet demand, they do not make enough diesel for the country's needs, the RAC stated. At the end of June, there were 15.1 million diesel vehicles on UK roads, a drop from 15.7 million a year prior, according to the Department for Transport, as cited by the BBC.

The Middle East conflict sent global oil prices soaring by effectively closing the Strait of Hormuz, one of the world's key water transport routes for oil, liquid natural gas, and other essential commodities, thereby limiting global supplies, the BBC reported. About 20% of the world's oil and liquefied natural gas normally passes through this waterway.

US President Donald Trump has responded to rising prices by considering a ban on US diesel producers selling overseas, a move that could push UK prices even higher, the BBC reported.

What It Means

Simon Williams, head of policy at the RAC, said that the diesel record "spells pain not only at the pumps for drivers, but for everyone who buys goods or services that rely on diesel lorries and vans." He added that these increased costs will "undoubtedly" be passed on to consumers, according to the BBC and RAC.

Williams stated that prices at the pumps will not decrease until there is a "sustained lower oil price - over several weeks, not days," the BBC reported.

The official markets regulator has stated it had "not seen evidence of retailers actively changing their pricing strategies to take advantage of the crisis," according to the BBC.

In May, then Prime Minister Sir Keir Starmer announced that a planned 5p increase in fuel duty, due in September, would be postponed until the end of December because of the conflict, the BBC reported.

What Happens Next

Because transporting oil is a slow process, price movements in wholesale oil markets typically take about two weeks to be reflected at the pump, the BBC noted.

Even if a deal is agreed to reopen the Strait of Hormuz, experts warn it will take time before normal levels of shipping resume, and the impact of the war could continue to affect the global economy for potentially months to come, the BBC reported.

While President Trump has suggested a ban on US producers selling diesel overseas, he has not yet implemented it, and views differ on the seriousness of this threat, the BBC stated. If such a ban were to occur, many agree it would harm countries heavily dependent on US diesel, including the UK and several European nations. Others note that while a ban might reduce US diesel prices in the short term, it could have unintended long-term effects that could hurt US production and put pressure on US diesel prices, according to the BBC.

Williams suggested that while the UK government has "limited leverage when it comes to ending the US/Iran war," lowering fuel duty further or reducing VAT could "ease the burden" at home, the BBC reported.