Petrol is a necessity for most people, with a designated budget assigned each week. Currently*, the average price of a litre of petrol in the UK is £1.62, up from £1.21 at the end of 2018. Around ten years ago, this figure was around 89p a litre.
It is forecasted that the number of cars on the roads will double across the world by 2040 — this begs the question, what will happen to petrol prices? Further price inflation can certainly be expected in the future, but what does 2020 hold in store for our cars and wallets?
With the help of Lookers, who have a variety of used cars for sale, we look into this matter further.
Rising Fuel Prices
Petrol price inflation has certainly alienated the global population. This year started with France’s yellow vest movements, and is ending with fury in Ecuador, where a state of emergency has been announced as the population fight against the sharp rise of fuel costs. The situation started when Ecuador’s president, Lenín Moreno, introduced austerity measures which caused diesel prices to double, and regular fuel prices to increase 30 per cent.
Two weeks of protests led by the indigenous population has caused the economy to suffer, blockades throughout the streets, and a huge disruption of business. Protesters demanded an increase on taxes for the wealthy — Moreno has agreed to withdraw the austerity measures in a deal to stop the violent protests.
Moreno claimed that the price of petrol would rise to $2.30 a gallon from $1.85, and diesel would rise to $2.27 from $1.03. This austerity measure was designed to remove fuel subsidies, which is where the government pay to keep prices down for the population. This was costing the Ecuadorian government around $1.4 billion a year, around five per cent of their budget. The removal of the fuel subsidy was criticised by many as the poor wouldn’t be able to afford the higher prices or bus fares and wasn’t believed to be justified when oil prices had been relatively affordable.
Following from this, Moreno has since announced a tax reform on businesses to increase government finances, saying “We will ask those who have more to pay more”, with an introduction on taxing plastic bags and e-cigarettes.
Fuel Prices Globally
Fuel prices in Europe are forecasted to decline to around £1.08 per litre in 2020, based on estimations by the New York Mercantile Exchange, including countries like the UK, Germany, Spain, France and Italy.
If you’re planning a road trip next summer, you might be interested to know that top holiday destinations with cheap petrol per litre include Kuwait (27p), Malaysia (39p), Qatar (40p), Egypt (42p) and Saudi Arabia (43p). Interestingly, the States, one of the largest economies, pays an average of 61p per litre in comparison to the UK’s £1.26.
Demand increases for fuel from emerging markets, whereas it declines in developing countries as environmental regulations get tighter and the popularity of electric vehicles rise. The demand from emerging markets is expected to taper off as cleaner technologies become more accessible and affordable.
With this in mind, fuel prices are notoriously unpredictable, with factors such as tax and policy amendments, the volatile price of crude oil, the USD exchange rate, seasonal factors and marketing and distribution costs. As Brexit is around the corner, there is a growing sense of uncertainty where nobody can anticipate what will happen to UK fuel prices.
*Price as of 4 November 2019.