UK petrol prices could jump to £2.50 a litre, while diesel could touch £3 and may even be rationed as a result of Russia’s invasion of Ukraine, experts told a Treasury select committee.
Leading economics and energy analysts also called on chancellor Rishi Sunak to subsidise lower-income households so they can cope with soaring energy bills amid a broader spike in the cost of living, The Guardian reported.
The average cost of a litre of petrol on 13 March rose to almost £1.64, while diesel was up at £1.73, according to the latest figures from data firm Experian (LSE:EXPN) Catalist, with prices continuing to hit record highs following Russia’s invasion of Ukraine on 24 February.
The UK gets relatively little crude oil and gas from Russia, but about 18% of diesel imports came from Russia in 2020.
The Treasury committee was told that prices could increase much further if geopolitical tensions continue or even worsen, with the cost of diesel potentially doubling in the UK, the paper reported.
Dr Amrita Sen, a founding partner and chief oil analyst at the research consultancy Energy Aspects, warned that diesel was likely to be rationed in Germany before the end of March and that the same could happen in the UK.
Government win
While consumers are suffering, the UK government is benefitting from the spike in prices.
Fuel duty is levied at a flat rate of 57.95p per litre for both petrol and diesel, while VAT at 20% is then charged on both the product price and the duty, according to the RAC Foundation.
The chancellor should consider cutting the level of fuel duty if pump prices continue to rise, the RAC Foundation said.
The Republic of Ireland previously announced that excise duty on petrol and diesel will be reduced until the end of August. Petrol will be cut by 20 cents a litre and diesel by 15 cents a litre.
“If the chancellor is looking for ways to help with soaring household bills then an obvious option would be to follow the example set in Ireland and cut the rate of fuel duty to ease the burden of soaring pump prices,” said RAC Foundation director Steve Gooding.
“That would directly benefit the three quarters or so of households that run a car and indirectly help us all by reducing the rising fuel cost pressure on businesses and hauliers that will otherwise inevitably make its way to higher prices on the shelves for consumers.”