Why Is Petrol So Expensive in the UK?

At 140.3p per litre, UK petrol prices feel punishing. But where does the money actually go? The answer is a combination of government tax, global oil markets, and the cost of getting fuel from a refinery to your local forecourt.

The tax breakdown

The single biggest chunk of what you pay at the pump is tax. Fuel duty is currently 52.95p per litre, fixed regardless of the pump price. On top of that, VAT at 20% is charged on the total price including the duty itself — meaning you pay tax on a tax.

Together, duty and VAT account for roughly 60-65% of the pump price. On a typical 50-litre fill at 140.3p/litre, you're paying around £42.09 in tax.

The role of crude oil

After tax, the largest cost is crude oil itself. The UK mostly uses Brent crude, priced in US dollars. This means UK pump prices are directly exposed to two things: the global oil price and the GBP/USD exchange rate. When the pound weakens against the dollar, petrol gets more expensive even if the oil price hasn't moved.

Crude oil typically accounts for around 40-45p per litre of the pump price, though this fluctuates significantly with global supply and demand.

Refining and distribution

Crude oil has to be refined into petrol before it can be used. The UK has a small number of refineries — Stanlow in Cheshire being the most significant. After refining, fuel is transported by pipeline and tanker to regional depots, then by road tanker to individual forecourts. These logistics costs are factored into the price you pay.

Regions far from refineries — like the Highlands of Scotland, Cornwall, and rural Wales — often pay more because distribution is more costly.

Why is London more expensive?

London currently averages around 144.5p/litre — about 4.2p above the national average. Higher commercial rents, congestion surcharges on fuel deliveries, and strong demand density all push forecourt operating costs up in the capital.

Retailer margins

Despite the headlines, forecourt retailers typically make a relatively modest margin of 6-10p per litre. Supermarkets use petrol as a footfall driver and often price at or near cost. Premium brands like BP and Shell charge more partly due to brand, partly due to premium fuel additives, and partly due to higher site operating costs.