The fall in the value of the pound has resulted in drivers having to pay an extra £6 for a tank of petrol, an analysis by the AA shows.
Sterling’s recent decline, exacerbated by Friday’s market-shattering mini-budget, has hit hard-pressed drivers’ pockets, the auto group said.
The AA said that the drop in oil prices had “seriously undermined” pump price cuts to where it was before Russia invaded Ukraine as sterling plunged to its 37-year low.
It calculated that if the pound had kept its value of about $1.35 by mid-February, instead of Friday’s $1.11, gas pump prices would be at least 11 pence a liter cheaper or £6.05 for a tank of 55 litres.
Britons have been pressured by record fuel prices this year as Russia’s invasion of Ukraine pushed oil prices up and seeped through to the pumps. However, the strength of the dollar against the pound also contributed to the gain.
The AA’s fuel price spokesperson, Luke Bosdet, said: “The impact of the exchange rate is often overlooked when drivers compare oil price movements with those at the pump. At the moment it is critical. Oil and fuel in the commodities markets are traded in dollars, making the weaker pound very bad news for motorists.
“The price of oil is back to the level it was at the beginning of the war in Ukraine, but gasoline is more expensive. Two-thirds of those higher costs are due to the weakness of the pound.”
Gasoline averaged 164.8 pence per liter at the start of the week, compared to 173.5 pence in mid-August. But the 8.7 pence drop is less dramatic than the 15 pence drop between mid-July and mid-August.
The average price of diesel fell by 12.5 pence between mid-July and mid-August, before falling another 3 pence at the start of the week to 181.3 pence.
Bosdet advised drivers to look for fuel, claiming they could find it at a “competitive gas station” for about 10 pence per liter below the average price.
The pound continued to lose ground against the dollar after the AA made its analysis, falling below $1.09 for the first time since 1985.
Earlier this year, the government asked the Competition and Markets Authority (CMA) to conduct a “brief and focused” review of the fuel sector, amid claims that petrol retailers were making a profit.
The competition watchdog has since launched an in-depth investigation into the fuel sector after raising concerns about margins being made by refineries.
In July, the CMA advised the government to consider measures to make it easier for drivers to compare fuel prices at different filling stations to increase competition.
Apart from that, activists expressed their disappointment on Friday that Chancellor Kwasi Kwarteng did not reduce fuel excise duties in his mini-budget.
FairFuelUK’s Howard Cox said: “Low income families, small businesses and the economy will continue to be crippled by high pump prices, high fuel taxes and opportunistic profit making in the fuel supply chain. Neither has been addressed by this persistent atypical Tory administration.
Kwarteng said he was “happy to engage in talks” with MPs about calls for a fuel tax cut.