Drivers are being warned over filling up with petrol despite forecasts that the conflict in the Middle East risks a sudden increase in the price of a tank of fuel. Breakdown service the AA has said that pump prices have already begun to rise over the past week, and the escalation in the conflict between Iran and the US could ‘threaten even higher costs’ for UK drivers. Though it would follow that who need to fill up would likely be better off filling up right now, as there are fears petrol and diesel prices could rise further still, the AA has stressed that it is not necessary to change your routine.
Oil supplies could be affected by the conflict after Iran reportedly warned tankers on the Strait of Hormuz that no ships would be allowed to pass through. UK Maritime Trade Operations Centre officials said that two vessels have been struck near to the key trade artery.
The Strait of Hormuz is used by tankers carrying around one-fifth of the world’s oil supplies and seaborne gas.
On Monday, the price of Brent crude oil soared by as much as 13%, rising above 82 dollars a barrel, before paring back.
It was 8.8% higher at 79.3 dollars a barrel after 9am.
Right now, the average prices are 132.9p per litre for petrol and 142.4p a litre for diesel.
AA spokesperson Luke Bosdet told the Express: "Pump prices in the coming weeks will inevitably increase, at worst in the short-term back up to where they were at the start of year. Petrol in February had been at a low of 131.9p a litre. It had started this year at 135.7p a litre,” says Edmund King, the AA’s president.
"The silver lining is that the country is coming out of winter and the fuel efficiency of cars improves significantly with warmer weather: engines are no longer straining with cold starts or toiling to power heaters, lights and wipers. Typically, car owners see an improvement of three miles per gallon as they get more range out of a tank of fuel. As a rule of thumb, each 1 mpg change is equivalent to 1p on or off a litre of fuel."
But the AA stressed that it is urging drivers not to 'break their refuelling routine', despite forecasting a price rise in the coming weeks.
It added: "There is no need for drivers to break their refuelling routine. As well as better fuel efficiency, it takes time for cost increases to work their way through to the pump. Supermarkets tend to hold their prices down for longer.
"However, with the Government’s Fuel Finder pump-price transparency now becoming established, drivers will soon be able to spot all the cheaper fuel stations locally and locate where to keep their fuel costs down”.
Emma Wall, chief investment strategist at Hargreaves Lansdown, said: “Oil prices have unsurprisingly rallied, up as much as 13 per cent through Asian trading.
“Brent crude opened the week at $82 – up $10 on Friday’s price.
“Iran is only responsible for around five per cent of global oil supply, but the UAE, which has come under retaliatory fire because of its US military bases, is the fifth largest global exporter.
“Further pressures were added yesterday afternoon as Iran targeted the Strait of Hormuz, a narrow pass between Oman and Iran through which ships carrying around a fifth of the world’s oil and gas pass daily.
“In response, tankers halted movement to protect their cargo and have yet to resume normal activity.
“There are echoes of the 1979 Iranian revolution, which not only caused a significant shift in geopolitics and re-configuration of international allies and trade partners, but also resulted in an oil crisis which saw the price of crude double over the course of a year, causing higher global inflation and slower economic growth.
“The dynamics of oil and gas trade have evolved since then, but it will be this longer-term stagflation risk that equity and bond markets are most worried about.
“There are a number of factors which will determine the economic impact of elevated oil prices on a country-by-country basis.
“The first is the amount of reserves nations have accrued before this disruption.
“China is the world’s largest importer of oil so any move in the oil price has a read-through to economic growth.
“However, the regime is hyperaware of its dependency on producer nations and has subsequently built up significant stores which will provide some buffer to the current disruption, protecting the nation from potential inflation shocks in the short term.
“The world’s number one oil exporter, Saudi Arabia, also upped its stores outside of the Gulf in recent weeks."
“The second factor is supply dependency.
“Russia invading Ukraine brought the benefits of energy autonomy into focus – and nations such as the US have ramped up production in recent years to become the second largest oil exporter in the world.
“At the time of the last Iranian oil crisis, the US was a net importer of oil.
“Europe and Japan are most sensitive today, relying on the Middle East for their energy.
“Major oil producer Russia is subject to sanctions from many western economies, but China and India are still buying.
“Finally supply routes are key – the Hormuz Strait may be on pause, but the Red Sea oil pipelines in Saudi and Egypt avoid both Hormuz and the Suez Canal, ability for producers to use these routes is key to minimising global impact.
“Crucially, while oil prices may be higher now, consensus is that this disruption is transitory – and so too will the impact be on wider asset classes.
“In the event of an effective transition of power – and end to the fighting – oil prices are expected to return to $65 a barrel within weeks, and therefore the likelihood of a global growth shock is minimal.
“However, if in-fighting erupts and conflict drags on expect equity markets to respond badly.
“The US dollar has rallied – a reflection of both the nation’s military dominance and oil independence as well as a confirmation of its position as a low-risk and dependable asset in times of global uncertainty.”