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Drivers to be hit by spike in crude oil prices

Cherry Reynard
Written By:
Cherry Reynard

News that President Trump has pulled the US out of the Iran nuclear deal could impact drivers, the RAC warns.

Since the announcement, the oil price has spiked 5% higher and now sits around 50% higher than its level a year ago. This will have a direct impact on pump prices for drivers.

RAC fuel spokesman, Simon Williams, said: “Prices at the pumps are likely to rise by at least 2p a litre in the next fortnight as a result of the United States’ decision to pull out of the Iran nuclear agreement. The price of oil has already jumped to $77 a barrel on the back of this news.

“The last time oil was this expensive was in November 2014 when prices were falling due to OPEC’s decision to oversupply the market. Unfortunately, the situation now is very different as supply is being curbed and the pound is far weaker ($1.35 v $1.57) which makes fuel more expensive as, like oil, it’s traded in dollars. This is potentially a toxic combination for motorists as it will inevitably lead to price rises on the forecourt.”

Williams added that the price rise comes at a bad time for drivers, with 3p a litre added to the average price of petrol and diesel last month, making it the worst monthly fuel price rise since December 2016.

He said: “If another couple of pence a litre goes on as a result of the higher oil price and the fact the pound is at a four-month low could take the average cost of a litre of unleaded to 126.5p – a price last seen in October 2014 – which would make filling up a 55-litre family car cost nearly £70.”

However, Chris Beauchamp, chief market analyst at IG said that oil price rises may be done for the time being as oil’s remarkable run has now reached the stage where it is being talked about outside of financial markets.

“This is usually a sign that the rally has at least peaked for the time being. Even if the Iranians do find themselves cut off from the global oil market, soaring production elsewhere means that there will be plenty of others willing to step into the breach,” he said.