How UK fuel prices are actually set (and why they differ street to street)
Wholesale oil, tax, retailer margin and location — a plain-English breakdown of what makes up the pump price you pay.
Two petrol stations a mile apart can charge 10p a litre apart for the same fuel. That is not a rip-off in every case — it is the way UK fuel pricing works. Here is what is actually going on.
The four parts of every pump price
Whatever you pay per litre in the UK breaks down into four buckets:
- Wholesale fuel — the raw refined petrol or diesel the retailer buys.
- Fuel Duty — a flat tax set by HM Treasury, currently 52.95p per litre for standard petrol and diesel.
- VAT — 20% charged on the whole lot, including on the Duty.
- Retailer margin — what the forecourt keeps to cover staff, rent, card fees and profit.
The Duty and VAT slice is fixed nationally. So when prices move day to day, it is almost always the wholesale price and the retailer margin that shift — not the tax.
Why the station down the road is cheaper
The big supermarkets (Asda, Tesco, Sainsbury's, Morrisons) treat fuel as a loss-leader to bring you inside the shop. Motorway service stations do the opposite — captive audience, no competition for the next 20 miles. Rural single-pump forecourts sit in between: lower volumes mean they need a bigger margin per litre to stay open.
Why prices go up quickly and down slowly
This is a real, measured effect — the CMA and RAC have both documented it. When wholesale rises, retailers pass it on within days. When wholesale falls, the drop hits the pump much more gradually. Watching the wholesale market is how price-tracking sites (including this one) spot when your local station should have dropped and hasn't.
What you can actually do
- Compare before you fill up — a 5-minute check is often worth £5–£10 on a full tank.
- Don't drive miles for a saving. Two miles each way for 3p off a litre on 40 litres saves £1.20 and burns most of it in fuel.
- Fill in the mornings in a heatwave if you're pedantic — cold fuel is denser, so you get very slightly more per litre. The effect is tiny; convenience matters more.
- Set a price alert for your usual station and let it tell you.
Compare it yourself
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