The Iran conflict has added an estimated £7.5 billion to motorists’ fuel bills, intensifying pressure on Labour to abandon its planned increase in Fuel Duty.
Research from the RAC Foundation estimates that drivers have paid the additional sum since 28 February, when petrol and diesel prices surged after the US bombed Iran and Tehran retaliated by blockading the Strait of Hormuz.
At the same time, the Treasury is expected to receive an extra £1.3 billion in VAT as a result of the higher pump prices.
That increase reflects the fact that VAT, charged at 20 per cent, generates more revenue when the underlying price of fuel rises.
The figures have renewed calls for Labour to use Andy Burnham’s first Budget as Chancellor next month to cancel its proposed 3p-per-litre Fuel Duty increase, which is due to take effect on 1 January.
With the war showing no clear sign of ending, motorists could face sustained financial pressure at the pumps for months to come.
Petrol and diesel prices reached a post-war record and a four-year high today, after the latest escalation sent international oil prices climbing above $100 a barrel once again.
Motorists have paid an additional £7.5 billion at petrol stations since the Iran war began, according to RAC Foundation research
Tory shadow transport minister Greg Smith said proceeding with a Fuel Duty increase would amount to a ‘slap in the face’ for motorists from Whitehall
Reform UK deputy leader Richard Tice accused Labour of ‘taking drivers for a ride’ over its proposed Fuel Duty rise
Tory shadow transport minister Greg Smith said: ‘Pump prices are now eye-watering, and the Government must stop adding to the pressure by pushing through Fuel Duty increases.
‘As prices rise, so do the Chancellor John Healey’s VAT receipts. Increasing Fuel Duty on top of that would be a clear slap in the face for motorists from Whitehall.’
Richard Tice, deputy leader of Reform UK, said: ‘Labour is quite literally taking drivers for a ride.
‘The planned 3p Fuel Duty increase should be scrapped immediately. Families and businesses need tax relief, not another blow to their finances.’
Steve Gooding, director of the RAC Foundation, said: ‘The Government cannot control when the war in the Gulf ends. But the Chancellor can decide how to reduce the burden created by exceptionally high fuel prices for private motorists and the many businesses dependent on diesel vehicles when he sets out his plans for Fuel Duty in the upcoming Budget.’
Average petrol prices climbed again today to a post-war record of 170.54p a litre, according to the RAC, while diesel hit 192.86p. This is the highest for both fuels since August 2022 and July 2022 respectively.
Before the conflict erupted, they were 132.83p a litre and 142.38p respectively.
It means the cost of filling up the average 55-litre tank in a family car with petrol is now £93 and £106 with diesel. Pre-war, a fill-up was £73 and £78 respectively.
The RAC Foundation study found diesel drivers – which includes vans and lorries as well as cars – have been hit the hardest.
Of the extra £7.5 billion shelled out at the pumps, it has cost diesel drivers £5.4 billion and they account for £894 million of the Treasury’s £1.3 billion VAT windfall.
Those calling for Fuel Duty to be frozen beyond January 1 also point out that the extra cost to haulage firms – which mostly use diesel – is often passed on, leading to higher prices on shop shelves and pushing up inflation.
Chancellor John Healey was under growing pressure today to abandon a planned Fuel Duty hike as pump prices hit a four-year high
Last week, US President Donald Trump tried to claim soaring prices were due to the war in Ukraine rather than the conflict he started with Iran
Average petrol prices climbed again today to a post-war record of 170.54p a litre while diesel hit 192.86p, the highest for both fuels since summer 2022
At present, Fuel Duty is set to be hiked by 3p a litre on New Year’s Day and a further 2p on March 1, netting billions of pounds more for the Treasury as it scrambles for cash to pay for a series of unfunded commitments made by Mr Burnham during his first weeks in Downing Street.
The RAC Foundation study looked at fuel consumption data and average daily pumps prices since 28 February and compared them with pre-war prices.
Last week, global oil prices surged above $100 a barrel for the first time since July as the conflict in the Middle East escalated.
Brent crude, the international benchmark for oil prices, rose by more than 3% to top $101. Today it was trading at around $106 to $108 a barrel.
Oil prices have been pushed up by the effective closure for many months of the Strait of Hormuz, through which around a fifth of oil supplies travelled before the war.
It has sent pump prices spiralling in other countries too, with many Western governments slashing fuel taxes to help out hard-pressed motorists.
Last week, US President Donald Trump tried to claim soaring prices were due to the war in Ukraine rather than the conflict he started with Iran.
He said Ukrainian president Volodymyr Zelenskyy had to ‘stop knocking out diesel fuel in Russia’ because this was leading to a ‘shortage of diesel fuel’.
He made the remarks two days after diesel prices in the US hit a record high and as he faces pressure amid predicted losses in November’s US mid-term elections.
The Treasury was contacted for comment.
