Oil price rise spells 'misery' for motorists in 2018, RAC warns

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A steady rise in the cost of oil could spell “misery” for motorists in 2018, as price hikes look increasingly likely, the RAC has warned.

The price of a barrel of Brent crude has this week been nearing the $70 (£51.70) mark for the first time since 2014 helped by an agreement between countries of the Organisation of the Petroleum Exporting Countries (OPEC) to cut production, coupled with healthy global demand.

The RAC on Wednesday said that as a result, there is likely to be a “knock-on effect on the forecourt” across the UK over the coming weeks and months.

The automotive services company said that the UK average price of unleaded petrol currently stands at 121.27p a litre, with diesel at 123.97p. Those prices have risen from 2017 lows of 114.33p and 115.02p respectively, and could rise further as a result of $70-a-barrel oil becoming a “new norm”.

“If oil stays at this level, pump price hikes will be almost inevitable. With households across the country still feeling the cost of Christmas this is not the start to 2018 anyone would have wanted. It could also negatively affect business and further fuel inflation,” said RAC fuel spokesman Simon Williams.

Global oil prices started falling steadily at the beginning of 2014, thanks to a global supply glut. That decline started feeding through to UK pump prices by the middle of that year, and by December 2015 a few low-cost retailers were selling both petrol and diesel for under £1 a litre.

The crude price bottomed out in the early part of 2016, at around $26 a barrel, and the national average pump prices steadied at around 101.65p a litre for unleaded and 100.78p for diesel.

But since then prices have largely been rising. The price per litre of unleaded petrol averaged 118p last year and the price of a litre of diesel averaged 120p.

In November, OPEC as well as non-members like Russia agreed to extend an output-cutting deal that they had in place to cover all of 2018. Since then, the price of crude has risen by more than 13 per cent.