Fuel prices for UK motorists might finally be about to stabilise after oil companies were told to release more oil onto the market.
Drivers have been hit by 10 months of consecutive price rises on the forecourts, with both petrol and diesel smashing previous record highs in recent weeks.
An average fill-up for a family car is now £19 more expensive than it was a year ago, with the average price of a litre of fuel 34p higher than in January.
Now, UK oil firms have been authorised to release up to 1.5 million barrels from their strategic reserves in order to ease pressure on transport and home energy costs.
It is hoped that introducing more oil to the market will address the high demand and bring down wholesale costs.
As a result, drivers could see a slowing of price rises or possibly even a reduction if retailers pass on savings to customers.
The move by the UK Government is part of a coordinated global effort to increase oil availability. The United States has authorised the release of 50 million barrels and other major economic powers are doing similar.
A spokesman for Prime Minister Boris Johnson said: “We will work closely with our international partners like the US to do what we can to support the global economy through the transition following the pandemic.
“That is why we are joining other countries led by the US and including China, India, Japan and Korea in allowing companies in the UK to voluntarily release some of their oil reserves.
“It is a sensible and measured step to support global markets as we emerge from the pandemic. This will be voluntary, not mandatory.
“If all companies were to choose this flexibility, it would release the equivalent of 1.5 million barrels of oil.”
RAC fuel spokesman Simon Williams said the move would offer some “welcome respite” for drivers but said retailers were still taking advantage of customers.
He commented: “While this action is clearly needed because of what’s happening with global oil demand there are also issues at home with retailer margins which the Government would do well to investigate.
“Last week the wholesale price of fuel dropped dramatically but the biggest retailers, who lead the market, resisted passing these savings on to drivers, instead holding off in the hope the price of oil would go back up. This is a classic example of ‘rocket and feather’ pricing. This also smacks of retailers taking advantage of the public’s general acceptance of rising energy prices.”
Why is petrol and diesel so expensive?
The main reason fuel prices have soared this year is due to the wholesale cost of oil, which affects the cost of producing petrol and diesel.
Crude oil has more than doubled from $40 a barrel last year to more than $80 a barrel in recent months.
After a slump during 2020, demand for oil has jumped sharply this year but major oil producers, including the OPEC nations and Russia have limited supply in an effort to make up for lost profits last year. As a result of high demand and low supply, the price has been forced up.
Making matters worse for drivers is the rising cost of biofuels. Ethanol has gone up in price 50% since September, when E10 petrol with a higher ethanol content become the UK standard, adding another penny to the price of a litre.
Retailers have also been acccused of taking a bigger profit margin in an effort to counter last year’s slump.