Why Is Fuel So Expensive Right Now?

Petrol above 150p, diesel above 164p, and a diesel premium that briefly hit 34p a litre. Here's what's actually driving it, exactly where every pound at the pump goes, what the government has done — and the genuine fiscal reason it won't do more.

Fuel duty has been frozen at 52.95p per litre since March 2022 — a "temporary" 5p cut from 57.95p, itself the rate that had already been frozen since 2011. In May 2026, facing pump prices at their highest since the conflict began, the Chancellor extended this freeze again rather than letting a scheduled increase go ahead, a move the Treasury says has saved the average driver around £120 since 2025 and keeps duty at its lowest real-terms rate in over 16 years.

Alongside this, the government gave haulage firms a one-off 12-month HGV Vehicle Excise Duty holiday, worth up to £912 per vehicle, and cut duty on red diesel (used by farmers and rail freight) by more than a third — described by the Treasury as its lowest rate in over 20 years.

This isn't really a mystery, and it isn't hidden — it's a straightforward fiscal trade-off the OBR has quantified directly. Ending the 5p cut and resuming inflation-linked rises would raise an estimated £2.4bn in 2026-27, then around £900m a year on average after that. Fuel duty raises over £26bn a year on its own; combined with VAT on fuel, vehicle tax, and "showroom" tax, motorists contribute more than £40bn a year to the Exchequer in total. Fuel duty is one of the very few major taxes where a rise doesn't require a politically difficult new announcement — it's simply a previously-scheduled increase being allowed to happen rather than delayed again.

There's a second, less-discussed factor: the Treasury directly benefits from higher pump prices through VAT, since VAT is charged as a percentage of the total price. A higher oil price doesn't just cost drivers more — it also increases the government's own VAT take on every litre sold, without any policy change required at all. This is a real structural tension in fuel policy that rarely gets stated plainly: the same institution deciding whether to intervene on high prices is also, to a modest degree, a financial beneficiary of them.

The road transport sector moves roughly 80% of all goods and materials across the UK, and around 98% of all food is delivered by truck at some point in its supply chain — which is why fuel price spikes here ripple into the price of almost everything else, not just what's paid at the forecourt directly. The Road Haulage Association calculated it now costs around £1,150 to fill a single lorry's tank at peak prices. One coach operator reported the cost of running a specific route rising from £415 to £585 — margin that has to come from somewhere, usually passed on to the customer or absorbed as lost profit.

One haulier told the BBC his firm was running a fuel surcharge for the first time in the company's history, with customers now paying an extra £50 to £100 a day depending on the work — and said continued pressure could ultimately threaten jobs, including long-serving staff he described as "closer to family than employees." Logistics UK says the sector already contributes £5.5bn a year in fuel duty alone, and has warned that further increases risk becoming an "inflationary timebomb" precisely because logistics costs are embedded in the price of almost every physical good sold in the country.

The picture for hauliers is genuinely mixed, not uniformly bad: the VED holiday and red diesel cut are real, welcomed relief — but from April 2026, both the HGV Levy and standard Vehicle Excise Duty for heavy goods vehicles are separately rising in line with inflation, meaning some of the relief is being offset by other rising costs at the same time, alongside increases to the National Living Wage and National Minimum Wage adding further pressure on operators' overall costs.