The Short Answer

You are paying more at the pump today than in previous periods when oil was at a similar price because the tax floor beneath every litre has risen sharply over the past 20 years. Fuel duty alone currently accounts for 52.95 pence per litre, and VAT is charged on top of both the fuel and the duty itself. The oil price only moves the pre-tax slice of what you pay, so even if crude returns to where it was in 2010, the pump price cannot follow it all the way down.

There is also strong and documented evidence that retailers raise prices more quickly when wholesale costs rise than they cut them when costs fall. The Competition and Markets Authority gave that pattern a name: rocket and feather pricing.

Who This Guide Is For

This article is for any UK driver who fills up with standard unleaded petrol (E10) or diesel (B7) at a UK forecourt and wants to understand why the price at the pump does not simply track the price of a barrel of oil. It covers UK retail pump prices from roughly 2005 to September 2026. It does not cover LPG, premium fuels, commercial bulk pricing, or overseas markets. All prices are retail pump prices in pence per litre (ppl) and include fuel duty and VAT unless stated otherwise.

Where Prices Are Right Now

Between summer 2025 and early 2026, pump prices were relatively stable at around 135 ppl for petrol and 143 ppl for diesel, according to DESNZ weekly road fuel price data published by the UK Government.

That changed sharply in February 2026. US and Israeli strikes on Iran disrupted oil supply, and within three weeks prices rose by 12 ppl for petrol and 25 ppl for diesel. By mid-March 2026, petrol had reached 161.61 ppl and diesel 183.49 ppl, based on DESNZ official weekly data.

On a 55-litre fill, that mid-March spike translated to roughly £13 extra for petrol and £25 extra for diesel compared with pre-conflict levels, according to PetrolPrices.co.uk reporting from May 2026.

What Has Happened to Oil and Pump Prices Over 20 Years

The two prices are related but they are not the same thing, and the gap between them has grown over time.

In 1988, a litre of unleaded petrol cost around 36p. By 2012, petrol had broken through 134 ppl. The all-time UK peak came on 4 July 2022, when petrol hit 191.6 ppl and diesel reached 199.2 ppl, according to DESNZ weekly records.

Over the same period, the price of Brent crude oil has swung dramatically. It spiked to around $147 a barrel in July 2008 before crashing below $40 by December of that year. You can trace that full history on the FRED/EIA Brent crude daily series or the Macrotrends interactive chart. By 2025, the average annual Brent price had fallen to $69.14 per barrel, more than ten dollars below the 2024 average, according to FRED monthly data.

So oil was cheaper in 2025 than it was for much of 2022 and 2023. Yet pump prices did not return to where they were in, say, 2010, when crude was at comparable levels. The reason is the tax structure.

How the Tax Floor Works

Every litre of petrol or diesel sold at a UK forecourt carries two layers of tax before the retailer adds a penny of margin.

Fuel duty is a flat charge, currently 52.95 ppl. It does not move with the oil price. It is the same whether crude is $50 or $120 a barrel.

VAT is charged at 20% on the total price including the duty. This matters because it means you are paying tax on a tax. At a 140 ppl pump price, VAT at 20% on the duty alone adds another 10.59p to your bill. That structure is confirmed by the OBR’s fuel duties explainer.

The RAC Foundation’s interactive chart shows how the tax share moves over time. When pump prices fall, the fixed duty becomes a larger proportion of what you pay. At lower prices, tax can account for 65 to 75 per cent of every litre.

When crude rises, the VAT take rises automatically, so the Treasury benefits twice from any oil price spike.

A worked example at 140 ppl. The pre-VAT price is roughly 116.7 ppl, of which 52.95 ppl is duty. VAT at 20% adds 23.3 ppl. More than 10 ppl of every fill-up is VAT charged specifically on the duty element.

The duty history matters too. From 1993 to 2000, a Fuel Price Escalator raised duty by 3 to 6 per cent above inflation each year, more than doubling it in seven years. After the 2000 fuel protests, the escalator was scrapped. Duty was then frozen 12 consecutive times between 2011 and 2021. It was cut to its current 52.95 ppl rate in 2022 following the Russian invasion of Ukraine and rising energy costs, and confirmed at that level in the October 2024 Budget, according to the House of Commons Library briefing SN04712.

However, the rate will not stay there. According to PetrolFinder, duty is scheduled to rise by 1 ppl in September 2026, by 2 ppl in December 2026, and by a further 2 ppl in March 2027, returning the rate to 57.95 ppl. PetrolFinder is not an official source, so check those dates against HMRC or Budget documents before treating them as confirmed. The OBR reports that fuel duty alone currently raises around £24 to £25 billion a year, roughly £850 per household.

Rocket and Feather: Why Prices Rise Fast and Fall Slowly

Even setting aside the tax floor, there is a documented asymmetry in how retailers respond to oil price movements.

When crude costs rise, pump prices go up quickly. When crude costs fall, pump prices drift down slowly. This is called rocket and feather pricing, and it has been investigated and confirmed by the Competition and Markets Authority.

The CMA’s market study found clear evidence of this pattern, particularly for diesel, and described it as completely unacceptable that consumers had been paying more as a result. The debate in Parliament on 3 July 2023 confirmed the CMA’s findings and the Government’s response.

The CMA estimated that diesel margins were elevated enough between January and May 2023 that drivers paid 13 ppl more for diesel than if margins had been at their 2017 to 2022 average, according to the House of Commons Library briefing. The average fuel margins at the big four supermarket retailers increased by an estimated 6 ppl between 2019 and 2022, costing their customers around £900 million.

The CMA’s response was the Fuel Finder Scheme, a mandatory transparency measure requiring all 8,300 UK forecourts to report price changes within 30 minutes. The theory is that if drivers can see prices in real time, competition will keep margins in check.

As of May 2026, with prices still elevated following the Iran conflict, the AA’s pump-price spokesman Luke Bosdet described the asymmetry as alive and well, calling it a pump-price postcode lottery, according to PetrolPrices.co.uk.

The Exchange Rate Factor

Crude oil is traded in US dollars. That means the pound-to-dollar exchange rate affects what UK refiners pay for crude independently of what happens to the barrel price itself. A weaker pound makes oil more expensive in sterling terms even if the dollar price has not moved. This is another reason why the relationship between a barrel price and your pump price is never straightforward.

Price Variation Between Forecourts

Not all forecourts charge the same. An RAC investigation for ITV’s Tonight programme in March 2024 found a 27 ppl difference between two filling stations a short drive apart. The CMA confirmed that drivers can save up to £9 per tank by checking prices before they fill up.

Supermarket forecourts remain consistently cheaper than the national average.

Check before you fill:

What to Watch Out For

Rocket with no feather. When you see a news headline saying oil prices have fallen, do not assume the pump price will follow quickly or fully. The evidence from the CMA and the House of Commons Library is that retailers are slower to pass cost reductions on than cost increases.

Tax rises already scheduled. Duty is set to increase in stages through to March 2027, according to PetrolFinder. If those rises proceed as reported, the floor beneath pump prices rises further regardless of what crude does. Check HMRC guidance for confirmation.

Postcode pricing. The same brand can charge different prices at different sites. A branded forecourt on a motorway will typically charge more than a supermarket five miles away.

Diesel vs petrol gap. The 2023 CMA findings showed diesel margins were pushed higher than petrol margins. Check current prices for both before assuming diesel is the cheaper option for your vehicle.

What You Can Do About It

Use a price checker before every fill. The Fuel Finder Scheme means all 8,300 forecourts must report price changes within 30 minutes, so RAC Fuel Watch and PetrolPrices.co.uk are more accurate than they used to be. A 10 ppl saving on a 55-litre tank is £5.50 back in your pocket.

Fill up at supermarket forecourts where practical. They have consistently lower margins than branded independents or motorway services.

Do not fill up immediately after a news event involving oil supply. Retailers tend to reprice quickly when wholesale costs rise. If the disruption is short-lived, waiting a week or two can mean a lower price.

Monitor the DESNZ weekly data yourself. The GOV.UK weekly road fuel prices page publishes average prices every Tuesday. It is free, official and clear.

Motor Mike’s Verdict

The pump price is not simply the oil price with a bit added on. It is a fixed tax floor of nearly 53 ppl, VAT on top of that tax, a wholesale cost in dollars converted to sterling, a refining margin, and a retailer margin that the CMA has shown does not always move symmetrically with costs.

There is no single villain. The tax structure is the biggest structural reason prices cannot fall as far as the oil price might suggest. Rocket and feather pricing by retailers is a real and documented problem on top of that. And the pound’s weakness against the dollar quietly makes things worse whenever sterling falls.

The one thing firmly within your control is where you choose to fill up. Use a price checker. Favour supermarket forecourts. And keep an eye on that DESNZ data so you know whether a rise at your local pump is tracking wholesale costs or simply fattening someone’s margin.