After a strong year for motorists, with continued growth in sales of new and used cars, and relatively low fuel prices, various factors are coming together which could see prices at the pumps rise sharply in coming weeks.
The chairman of the Petrol Retailers Association (PRA), Brian Madderson, has indicated that forecourt fuel prices will almost certainly rise by around 5 pence per litre, thanks to a combination of a 52-week high in the price of crude oil, and the recent fall in the value of the pound, mainly over Brexit concerns and a strengthening dollar. The average price at the pumps is currently around 113 pence per litre for both unleaded petrol and diesel after two months of increases; these figures are already close to a yearly high, and the figure could rise again by the end of October.
A major factor is of course the ongoing Brexit impact; the pound has now fallen to its lowest value against the dollar in some 30 years, prompting concerns across the industry – the cost of importing fuel has surged upwards, and may continue to do so; the upcoming Presidential election may also affect the relative values of the two currencies, and this could have an additional impact on consumers nationwide as well as for all areas of the motor trade.
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The PRA has called on the Chancellor to reduce fuel duty in his Autumn address, which could help offset the other factors and see a much smaller price hike passed on to the motorist. However, the Organisation of the Petroleum Exporting Countries (Opec) is already passing through a cut in the amount of crude oil produced, the first such drop in more than eight years, while some states, including Russia, are urging a stronger cap on production; these restrictions will inevitably push oil prices higher, leading to raised costs for everyone in the motor trade, and consumers too. In January a barrel of oil cost approximately 28 dollars, but this had risen to over 50 dollars by September – with the devaluation of the pound, this is now effectively even more expensive for the UK industry.
2015 and 2016 have generally been excellent years for the motor industry, the VW emissions scandal excepted, but with insurance premium tax on the rise, and this potential spiral in fuel costs, motorists are facing a tough winter ahead.