On 18 June, Iran and the US signed a deal aimed at bringing an end to the war that had sent shockwaves through the global economy. The key Strait of Hormuz shipping corridor is set to reopen, and prices at the pump have started to drift lower on rising hopes for peace. But for motorists who saw petrol and diesel costs surge after the conflict began in February, the relief is far from complete.
As of Thursday in the UK, petrol cost an average of 154.72p per litre, while diesel stood at 174.30p per litre, according to RAC Fuel Watch data. That is still well above the pre-war prices of 132.05p and 141.6p respectively, recorded nearly four months ago. In the US, average gasoline has fallen from last month's peak above $4.50 to $3.97 per gallon, up from $2.98 before the war; diesel rose from $3.76 to $5.09 over the same period.
“Iran-US peace deal sends fuel prices lower, but UK petrol at 154.72p and gas futures at 98p remain far above pre-war levels.”
Simon Williams, head of policy at the RAC, said the recent fall in global oil and wholesale petrol prices – if sustained – will “in time lead to much lower prices at the pumps”. But he added: “The big question is how fast will this happen, and whether the fall in pump prices happens as swiftly as the rise drivers had to endure through March and April did.”
UK gas prices almost doubled at the beginning of the conflict, sparking fears of higher energy bills. The benchmark UK gas price was below 80p a therm before the war, peaked at around 157p by 19 March, and has now fallen back to 98p per therm. Yet the consultancy Cornwall Insight warns it would be “overly optimistic” to assume prices will quickly return to pre-conflict levels.
The reason: the UK energy regulator Ofgem has already set its next price cap on household energy bills for July and it cannot be changed. The average household bill is set to rise by 13% – or £221 per year – from next month, affecting 33 million households in England, Wales and Scotland. Gas is used directly in millions of homes for heating and hot water, and generated about 27% of UK electricity last year.
While the peace deal has brought some respite, deferred negotiations on Iran’s nuclear programme for 60 days raise questions about how long this agreement will last. For now, motorists and households are left watching the pumps and thermometers, waiting to see if the fall in prices will match the speed of their rise.