Diesel hits record high as Chancellor faces calls for budget action

Diesel hits record high

Diesel prices in the UK have reached an all-time high, with the average price of a litre passing £1.99 for the first time and some forecourts already charging £2 or more. The previous record was set in June 2022 after Russia's invasion of Ukraine. Industry data show more than 1,200 forecourts, about 15% of the total, now charge at least £2 for diesel, while almost 2,000 more are at £1.99, around a quarter of forecourts. Some trackers put the five-day rolling average at £2 a litre.

Drivers and businesses count the cost

The cost of filling a typical family car with diesel is now more than £108, up by about £31 since February. Petrol has also risen, by about £23 a tank, but diesel has risen faster. A year ago diesel was about 142.8p a litre; it is now close to 198p. Taxi drivers, van owners and hauliers say the increase is unsustainable. One haulage firm with 20 lorries is spending an extra £4,000 a week on fuel. Another with 80 lorries says costs are up by more than £20,000 a week. A company with 60 trucks uses 50,000 litres of diesel a week, costing about £100,000. Operators are passing costs on through weekly fuel surcharges, which feed into shop prices and inflation. The RAC said the rise means pain not just for drivers but for everyone who buys goods moved by diesel lorries and vans.

Why diesel has surged

The war between the US, Israel and Iran has disrupted crude oil production and shipping, including through the Strait of Hormuz. Russian diesel exports have also fallen because of sanctions and Ukrainian attacks on refineries. At the same time, UK refining capacity has shrunk. The country now imports 54% of its diesel, up from 16% in 2000, and around a third of those imports come from the US. The UK has only about 42 days of diesel import stockpiles, down from roughly 100 days in the early 2000s. Diesel has risen more than crude oil because refining capacity has been hit and the crack spread, the gap between crude and refined fuel prices, has widened.

US export ban threat

President Donald Trump is considering a 90-day ban on US diesel exports to ease prices for American drivers before the midterms. Energy bosses and analysts warn that would push up prices in Europe. Chancellor John Healey said the UK has the stocks it needs and that talks with the US are continuing, but he gave no sign of an exemption. Officials have also pointed to low UK reserves.

Budget pressure builds

The record price has increased pressure on the government before next month's budget. Fuel duty has been frozen at 53p a litre, with a temporary 5p cut due to expire at the end of the year. Further increases are planned in January, March and April. Campaigners want the government to scrap the rise or cut duty further. The Treasury says any decisions will be taken in the budget. Abandoning the increases would cost billions. The Chancellor has promised a breathing space budget and a cost of living budget.

Political and economic fallout

The timing is awkward for the government, coming as Labour holds its conference and the Chancellor prepares his first budget. The cost of living, debt interest and pressure on public finances are already limiting options. Higher diesel costs could keep inflation higher for longer and complicate decisions for the Bank of England. Petrol prices have risen too but are not yet at a record. Diesel prices are also at record highs in the US, where the midterm elections are weeks away.

There is no quick domestic fix. Pump prices depend on global oil and refining markets, and the main relief would come from an end to the conflicts disrupting supply. Until then, drivers, hauliers and the Chancellor are all counting the cost.