Israel - Iran conflict and fuel pricing

Israel - Iran conflict and fuel pricing

16 Apr 2024 Posted By Joe Scotting

RHA Logistics Development Manager Nick Deal analyses what recent developments in the Middle East have on fuel prices here at home.

Business, motorists and general inflation are all hostages to global commodity pricing and pressure where oil and fuel are concerned.

We find ourselves once again in testing times where fuel costs are concerned, and the scenario is something that motorists and logistics providers can do little about apart from look for the best deal at the time fuel is needed.

Everything starts with the price of Brent oil, traded in dollars and in the UK we buy in pounds via conversion rates. In times of higher demand, prices rise or indeed in times of concern.

At the beginning of 2022 Brent had just reached $80 and diesel at the pump was around 149ppl with fuel duty at 57.95ppl (since 2011). In late February, Russia invaded Ukraine and for the next few months that year pricing was scary, topping out at nearly 200ppl for diesel in July even with fuel duty lowered to 52.95ppl (where it remains at present).

What also happened in July of 2022 was that the Competition Markets Authority (CMA) launched a market study into the supply of road fuel in the United Kingdom. This would take a year and the final report was published on 3 July 2023 and it found that competition had effectively lessened and prices were higher especially on diesel at the pump.  

There was further CMA commentary though in March 2024 and the result was pricing information in the future would be more accessible, this is currently in the process of being set up.

In 2023, there was relative calm with Brent between $84 to $75 on average per month with the December 2023 average for diesel at the forecourt (so plus vat) at just under 150ppl. Over the year, OPEC+ have squeezed production of oil to help bolster prices in the face of the poor global economic climate. Moving into 2024, Brent started the year in the $77s and has graduated to the current $90 due to the tension building on the Israel / Iran conflict with forecourt diesel pricing now around 158ppl.

The recent mass launch of missiles and drones aimed at Israel was deemed by the money markets a show of face for the Iranian domestic market and as such prices on Monday actually fell a little as did the price of wholesale fuels, diesel more so that unleaded. For operators buying in bulk the effect of this can be seen instantly regardless of the direction of pricing travel whereas the forecourt takes a while to climb or reduce.

Rising fuel prices means increased haulage costs, much is passed on via fuel escalator clauses but others have to roll with the dice. Ultimately, it is the consumer who pays more.

The big question is, when will Israel react and to what extent. Certainly, there is pressure on them not only for not increasing the Middle-East conflict but also because so much is tied around the prices of oil and if Iran takes action to affect the flow of tankers through the thin Straight of Hormuz then oil and of course fuel could leap. 

For now, it is calm.

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