Motorists around the world are facing a surge in petrol and diesel prices as the oil price shock triggered by the Iran conflict begins to filter through from the wholesale crude market to the petrol station forecourt. With Brent crude having surged more than 25% in a single week — from $72.50 to $91.89 a barrel — fuel retailers are preparing for the inevitable pass-through of higher costs to consumers in the coming days and weeks.
The transmission from crude oil to pump prices typically follows a well-established pattern. Refinery costs rise as crude prices increase, and those higher costs are passed on to fuel distributors and ultimately to motorists. The speed of transmission varies by country and fuel retail market structure, but a 25% jump in crude oil prices of the magnitude seen this week is significant enough to affect pump prices materially regardless of the specific market dynamics.
The underlying cause of the crude price surge — the Iran conflict and its disruption of Gulf energy supply — shows no sign of imminent resolution. Kuwait has already been forced to cut production due to storage constraints, and energy consultants estimate Saudi Arabia and UAE face the same situation within 20 days. With the Strait of Hormuz closed to normal commercial traffic, the supply constraints that have driven oil above $90 are likely to persist.
Qatar’s energy minister has warned of even higher oil prices ahead if the conflict continues, predicting all Gulf exporters could halt production and oil could reach $150 a barrel. At that price level, petrol costs would rise dramatically from even their current elevated levels. For households already under financial pressure from the post-Covid inflation period, another significant increase in fuel costs would represent a serious further squeeze on living standards.
The broader financial context has darkened considerably. Bond markets have recorded their biggest weekly jumps in years, rate cut expectations have been abandoned in both the UK and eurozone, and stock markets have fallen sharply. Airlines have issued profit warnings. Economists are revising inflation forecasts upward. The petrol price increases about to arrive at forecourts around the world are the most visible and immediate way in which the Iran conflict’s economic damage will touch the lives of ordinary people.
