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How UK fuel prices work

What actually makes up the price on the pump display, why it lags crude oil, and why the forecourt two miles away can be 10p cheaper.

7 min read · Written by Sam Richards · Last reviewed 2026-08-17

Key takeaways

  • Roughly half of a litre of petrol or diesel in the UK is tax: fuel duty is a flat 52.95p per litre and VAT adds 20% on top of everything else.
  • Wholesale costs move daily, but pump prices typically follow two to six weeks later — faster on the way up than on the way down.
  • Local competition explains most of the difference between two stations in the same town, not brand or delivery cost.

What you are actually paying for

The number on the pump display is four things stacked on top of each other: the wholesale cost of the fuel itself, fuel duty, the retailer's margin, and VAT charged on the total of the other three.

Fuel duty in the UK is a flat cash amount per litre rather than a percentage, so it does not rise when oil prices rise. That is why the pump price never falls as far in percentage terms as crude oil does — a large part of your litre is a fixed cost that does not move.

  • Wholesale product cost — crude oil plus refining, shipping and the sterling/dollar exchange rate.
  • Fuel duty — a flat rate per litre set by HM Treasury, currently 52.95p, frozen since 2022 including the 5p cut.
  • Retailer margin — the forecourt's gross take, historically a few pence per litre, and higher in recent years according to CMA analysis.
  • VAT at 20% — applied to the sum of everything above, so tax is charged on the duty as well.

Why the pump lags the oil price

Retailers buy fuel days or weeks before it reaches the pump, and they price the fuel in the tank rather than the barrel on the news. When wholesale costs fall, a site is often still selling stock it bought at the old price, so the saving reaches drivers slowly.

The Competition and Markets Authority has repeatedly described this asymmetry — commonly called "rocket and feather" pricing — where increases are passed on quickly and decreases arrive gradually. It is one of the reasons the CMA now requires retailers to publish their prices as open data, which is the feed this site is built on.

Why two stations a mile apart differ by 10p

Fuel is close to a commodity, so a forecourt's price is set mostly by what it can get away with locally. A site with a supermarket, a rival branded station and a busy commuter route within sight of it prices sharply. A site that is the only option for six miles does not have to.

Motorway service areas sit at the extreme of that logic: high rents, captive drivers and no visible alternative typically add 15-20p per litre versus a supermarket a couple of junctions off the route.

Brand matters less than people think. Two Esso forecourts a few miles apart can differ by 8p because most are run by independent dealers who set their own prices. Supermarket sites are the exception — they usually price to a national or regional policy.

How to use this when you fill up

The practical takeaway is that you cannot influence duty, VAT or wholesale costs, but the local variation is real money. On a 55-litre tank, a 10p per litre difference is £5.50 — enough to justify a two-minute check before you fill.

Check live prices near you before a big fill, plan long journeys so you refuel off-motorway, and treat the loyalty-card and premium-grade offers as marketing rather than savings unless the maths works for your car.

Frequently asked questions

How much tax is on a litre of petrol in the UK?

Fuel duty is a flat 52.95p per litre, and VAT of 20% is charged on top of the whole price including that duty. Together they typically account for a little over half of the pump price.

Why do fuel prices go up faster than they come down?

Retailers buy stock ahead of selling it and reprice cautiously on the way down. The CMA has documented this asymmetry in the UK road fuel market, which is part of why retailers must now publish prices as open data.

Do supermarkets really sell cheaper fuel?

On average yes. Supermarket forecourts consistently sit below branded majors in our live data, though the gap varies by region and there are individual branded sites that undercut them.

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Prices come from the UK Government's Competition and Markets Authority (CMA) open fuel price scheme and refresh throughout the day. Figures older than seven days are excluded.