Middle East tensions or high profit margins? A combination of both blamed for rise in petrol prices
2 July 2025, 08:29
Tensions in the Middle East are leading to more expensive crude oil, while retailers are still charging higher fuel margins, leading to a rise in petrol prices.
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After steadily falling for three months, fuel prices are back on the rise in June.
The average cost of petrol has jumped by almost 2p last month, according to new analysis of RAC Fuel Watch data.
Unleaded petrol costs 134.17p on average, meaning it costs about £73.79 to fill up a standard 55-litre family car.
This is £1.07 more than at the start of the month.
The price of diesel jumped even higher, by nearly 3p (2.8p) a litre. It went from 138.39p at the start of the month, to 141.21p at the end.
This means that it would cost £1.55 more to fill up a standard family car.
The price increase is blamed on a combination of factors - increased tensions in the Middle East and higher margins charged by retailers.
The recent flare-up in the region, which began with Israel’s surprise attack on Iran on 13 June, leading to several rounds of airstrikes between the nations, led to a sudden jump in the price of crude oil.
Iran is one of the world’s largest exporters of oil, and fears that it would stop the flow of oil through the Strait of Hormuz - one of the world’s most important shipping passages - led to increased market uncertainty.
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This pushed oil prices up, as the price of a barrel of oil jumped from around $64 in May to a high of almost $79 on 19 June.
But after a tenuous ceasefire was signed between the countries, the price of a barrel has climbed back down to $67 per barrel.
So why are prices still higher? Analysts suggest it is to do with the profit margins charged by retailers, which remain higher despite lower wholesale costs.
According to a recent report by the Competition and Markets Authority, a lack of competition between retailers has meant retailers don’t have enough reason to put their fuel margins down.
RAC fuel spokesperson Simon Williams said: “The arrival of summer has brought some wholly unwelcome increases to pump prices, with retailers wasting no time in putting them up following increased tensions in the Middle East. Unleaded and diesel are now both at their highest levels since late April, although we see no reason for further increases as wholesale prices have come back down again.
“July will be a telling month – will retailers halt further price rises, or even cut them if wholesale costs continue to slide? Or will drivers be stuck having to pay an elevated amount for the foreseeable future? This is particularly topical given it was only two days ago that the Competition and Markets Authority noted how weak competition within the fuel retailing market is.
“Thankfully, we’re a long way off the record pump prices of exactly three years ago – when the Russia/Ukraine conflict saw the average price of unleaded hit an unprecedented 191.53p a litre and diesel climb to 199.21p, with some retailers charging well in excess of £2 a litre.
“But given fuel represents a substantial chunk of most households’ monthly outgoings, it remains the case that drivers need to be guaranteed a fair deal every time they fill up. The creation of a government-backed Fuel Finder scheme by the end of this year should make it easier to find the cheapest forecourts. But just because the price is cheaper depending on where you buy it doesn’t mean it’s as low as it could be. That depends on retailers more accurately reflecting wholesale price drops and ending so-called ‘rocket-and-feather’ pricing.”
The RAC has launched a free app, myRAC, which it says will help customers find the lowest local price for fuel.
