If you drive regularly, it will have been impossible not to notice the recent spike in fuel costs in the UK.
Prices at the pumps have touched – and in some cases even surpassed – an unprecedented £2 a litre, with a bleak forecast suggesting that prices will only continue to rise in the foreseeable future.
The immediate effects are clear to see in the prices we’re all paying at the pumps right now, but here we will look into some of the other areas that are affected by the rise in fuel costs.
Why are petrol prices so high?
- Covid: In the depths of lockdown in the UK, petrol prices were almost half what they are now in some places, as the need for filling up was negated by so many of us working from home and being confined to our houses. That left a huge hole in the coffers of oil producers – which is now being filled.
- Supply and demand: As a knock-on from this, demand has spiked in the past year or so since restrictions were eased and then removed from society altogether. However, the supply is not yet back to pre-pandemic levels – driving prices to these sky-high levels.
- Russia-Ukraine war: Another factor is Russia’s invasion of Ukraine. Many countries, including the UK, USA and all EU states, have pledged to phase out the import of Russian oil. This makes crude oil all the more scarce and means other suppliers can charge higher prices.
So now we know the causes of the high prices at the pumps, where are some of the other areas feeling the pinch?
Contribute to cost of living crisis
Energy bills have also been hit by the same supply issues – and resulting rocketing prices – as those that have affected petrol prices. As families across the country feel the pinch, some businesses have been given little choice but to pass on some of their cost increases to customers – completing a vicious circle that has left many households facing difficult decisions over the coming months.
Impact on financial markets
Crude oil is the most traded commodity in the world, so any events that change its price dramatically can have an impact on markets across the world. Given the price of oil can affect all kinds of businesses, this volatility can also play into the hands of shrewd traders that can plan strategies using CFD trading and other instruments.
Increase in green innovation
While there is plenty of struggle ahead in the short-term, one long-term benefit of the current struggles may be the realisation that relying on fossil fuels is a dangerous game. The UK has already pledged to cease the sale of new petrol by 2030, while energy creation using greener methods may also be accelerated as the current cost of fuel continues to put many people into financial ruin.