Petrol price hits new record above £1.60 a litre

Petrol prices have risen above £1.60 a liter on average for the first time as Russia’s invasion of Ukraine continues to impact global oil prices.

Unleaded petrol hit £1.61 a liter on Thursday after rising 8p in a week, while diesel hit £1.70 a liter.

The RAC said wholesale fuel costs had fallen for two straight days but warned prices at the pump are likely to remain high for some time.

Rising fuel costs have put pressure on company margins.

North East Coach Travel, based in Newcastle upon Tyne, warned it could operate its services at a loss.

Jenna Rush, the company’s chief executive, said most of the bookings had been made over the past year and had not taken into account such a sharp rise in costs triggered by the economic fallout from the Ukraine war.

“It’s just awful, it’s a very, very stressful time,” Ms Rush told BBC Today.

“We already tendered for this type of work last year, nobody expected that fuel prices would rise as much as they are now.

“At the moment we are afraid that we will make losses with a further increase.”

Ms Rush warned that the rising costs could mean some operators terminating their contracts.

She said the company is trying to renegotiate prices with customers, but added that this is proving to be “very, very difficult”.

“The profit margins are too small for us to just carry them ourselves and aren’t coming from Covid anyway. It’s been two very tough years now it’s just another kick in the teeth.”

RAC Motoring Group said it costs over £88 on average to fill up a car with petrol.

It asked the government to reduce VAT on fuel, adding 28p to the cost of petrol or diesel per liter.

Fuel prices have risen amid fears of a global economic shock from Russia’s invasion of Ukraine.

Oil prices are mainly determined by the price of crude oil and the dollar exchange rate since agreements are made in dollars.

Russia is the third largest oil exporter and some Western countries, such as the US and Canada, have decided to halt imports from the country in response to Russia’s actions. This means that demand for oil from other producers has increased, leading to higher prices.

At one point, Brent crude — the global benchmark for oil prices — rose to $139 a barrel, its highest level in nearly 14 years.

The UK imports only about 6% of Russia’s oil, so is not as dependent on Russia for raw materials as other European countries and has announced plans to phase it out.

However, it is affected by the global price shifts.

But early Friday, the price of Brent crude was on track for its biggest weekly drop since November, trading at around $107.

The drop in prices is partly due to reduced fears of a European ban on Russian oil and partly to speculation that additional supplies from Iran, Venezuela and the United Arab Emirates could hit the market.

Still, higher prices at pumps are likely to remain in the coming weeks due to the way retailers are buying the fuel, said Simon Williams, fuel spokesman for the RAC.

“There’s real hope that those prices will leak out,” he said. “We would really hope that these price cuts take some of the heat out of the rising prices so we don’t have to set daily records.”

But Mr Williams said there are concerns retailers may be reluctant to cut their prices for fear of “catching a cold” if wholesale costs pick up again.

That means companies like North East Coach Travel will continue to bear the brunt of higher fuel prices for now.

“That could be the straw for some operators, where they just hand the contracts back and say, ‘I’m done, I can’t go on anymore,'” Ms Rush said.

“People are already worried about how they will manage to fill up their own car, pay for their own gas and electricity, which are increasing at home. How will they manage to keep paying for more things?”

The UK is seeing rising energy, food and fuel prices as the economy recovers from the pandemic, and some expect the inflation rate to hit 8% later this year.