According to the latest UK government data, petrol and diesel prices stood at 136.39 pence ($1.73) per liter and 142.71 pence per liter respectively on December 16, up by almost 4% and over 5% from 141.51 pence per liter and 150.38 pence per liter on December 18, 2023.
Such prices have not been reached since the pandemic and mark a stark contrast to what Luke Bosdet, motoring association AA’s fuel price spokesperson, called “severe” highs recorded earlier this year at UK gas stations of almost 150 pence per liter for petrol in May and almost 158 pence per liter for diesel.
Bosdet told Fastmarkets that the UK Treasury’s decision to continue the 5 pence per liter fuel duty cut in the October Autumn Budget, as well as its pledge to not increase the fuel duty on top of that, “ensured that petrol prices didn’t jump back to pre-Covid record levels.”
“Although pump price movements in recent weeks have been relatively flat, concerns with market volatility remain,” he said, adding that a new US president and global events “will likely make 2025 uncomfortable for drivers.”
Some have said that the inauguration of Donald Trump in January could disrupt oil markets, oil production and subsequently product prices, but independent energy analyst Neil Atkinson told Fastmarkets that an excess of shut-in spare capacity in the Organization of the Petroleum Exporting Countries (OPEC) and a lack of supply shortages will leave no call for higher production from the US.
“Trump’s ‘drill, baby, drill’ line is all rhetoric,” he said, adding that “companies already active in the US will make their decisions on how high prices should be based purely on the state of the market.”
“Trump’s presidency won’t bring any drilling mania, even if the US government opens up more federal lands for exploration and development,” Atkinson said, adding that companies have already got lots of prospects to drill for oil and they will do so only if they can sell it.
This sentiment was echoed by Norway’s consultancy firm Rystad Energy, which said in a note on December 17 that, while executives may be encouraged by the supportive rhetoric, “they are less likely than ever to boost budgets towards more drilling, especially as a potential oversupply of oil looms over the market and well productivity stagnates.”
Meanwhile, Colin Matthews, independent consultant at JouleVert, believes that Trump could still incentivize more oil out of the US – which remains the world’s largest supplier of crude oil — “and that would soften crude oil prices and, as a result, soften the [petrol station] prices,” he told Fastmarkets.
Lower crude oil prices forecast for the year ahead will likely add downward pressure to fuel prices, experts told Fastmarkets.
From mid-December, Brent crude oil futures prices hovered around $73 per barrel, compared with around $76-77 per barrel a year earlier, according to data from the Intercontinental Exchange (ICE).
“Barring any geopolitical eruption, it’s very difficult to see how crude oil prices in 2025 can be any higher than they are today because, although there’s plenty of demand, an increase of supply is likely to be even greater, so the likelihood of prices spiking is very remote,” Atkinson told Fastmarkets.
“If prices are going to budge, this will be more likely on the downside, which will mean that, eventually, lower crude oil prices will lead through to lower product prices, i.e., petrol and diesel, [and so] product supply will therefore be greater and prices will trend lower,” he added.
Earlier this year, the International Energy Agency (IEA) forecast that peak oil demand would be reached before 2030 as the world transitions to cleaner energy sources and because of a shift in China’s economy and a global slowdown in post-pandemic recovery.
But Atkinson said that this peak scenario remains unlikely, as “whatever efforts we make to reduce our oil consumption in the West will be more than offset in growth in oil demand in developing countries.”
This push will therefore help keep oil prices relatively stable around $70-75 per barrel for the foreseeable future, for at least the next 10-15 years, he said, adding that “as far as the UK is concerned, the gas or diesel price that people will pay at the pump, leaving aside taxes, will continue to reflect what the global market dynamics are.”
Bosdet said, “Volatility in the oil and commodity fuel markets pretty much guarantees that stable pump prices won’t last long.”
Fastmarkets understands that 2025 could bring some currency effects, with the US dollar strengthening versus other currencies, which could also be felt in UK fuel prices.
In the UK, hopes for more price transparency in 2025 remain high, with the AA expecting the government and the Competition and Markets Authority’s incentives to “gather pace through 2025,” which will “hopefully lead to a fully functional Fuel Finder at the end of it.”
The long-awaited Fuel Finder tool will require fuel retailers to report price changes quickly to a central database, and these will be relayed to drivers almost in real time via apps and websites – an incentive that the government pledged would be delivered in the October budget.
“Such a measure has transformed pump prices in other countries, and the AA hopes that it will lead to fairer prices, more choice for drivers and stronger competition,” Bosdet said.
Meanwhile, UK motoring association RAC said it hoped that the project would spark competition in 2025 and “lead to a fairer fuel retailing landscape that delivers better value for drivers wherever they fill up.”
Fuel prices could also be affected, although in the longer term, by the UK’s aviation minister Mike Kane signing of a new sustainable aviation fuel (SAF) mandate into law in November, which stipulates that 22% of jet fuel will come from sustainable sources by 2040, Fastmarkets understands.
While effects would not be felt for some time, according to JouleVert’s Colin Matthews, this new push could claim raw materials previously used for the production of biodiesel and hydrotreated vegetable oil (HVO).
“This would then mean that the whole truck industry has to go back to burning diesel, and when there isn’t an alternative, we know what the oil industry is likely to do, as they can then control the prices better,” he said.
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