How UK fuel prices are set

The four parts of a litre

Every litre of road fuel sold in the UK is built from the same four components, and only one of them varies meaningfully between forecourts.

Fuel duty

A flat 52.95p per litre, frozen at that level since March 2022. It is identical on petrol and diesel, and identical in Cornwall and Caithness. It does not rise or fall with oil prices.

VAT at 20%

Charged on the fuel and on the duty. Because it is a percentage of the total, the VAT take rises automatically whenever pump prices rise — no decision required.

The wholesale product

What the retailer paid for the fuel itself, driven by crude oil, refining margins and the pound-dollar exchange rate, since oil is traded in dollars.

Delivery and retailer margin

Getting the fuel to the forecourt, running the site, and whatever the retailer chooses to make. This is the only part they control.

Why the tax structure matters more than it looks

Because duty is a fixed amount rather than a percentage, it compresses the visible difference between forecourts. If two sites pay the same duty and VAT, a 5p gap in their margins shows up as roughly a 6p gap at the pump once VAT is applied to it.

It also means the headline "fuel prices have risen 10%" is misleading about what changed. When the pump price moves from 150p to 165p, the duty component has not moved at all — the entire change sits in wholesale costs and margin, so the underlying product price has moved far more than 10%.

So why do neighbouring forecourts differ?

Duty is national. VAT is national. Wholesale costs barely differ between retailers of any scale, because they buy from the same terminals. That leaves margin, and margin is a local decision.

A forecourt with three competitors within two miles prices against them. A forecourt that is the only one for fifteen miles does not have to. This is why the widest price gaps in Britain are not between regions but within them — the spread inside a single county is routinely larger than the gap between the cheapest and dearest region.

It is also why supermarkets are consistently cheaper. They are not buying fuel better than anyone else; they are choosing a thinner margin because the forecourt exists to bring people to the store.

What the government scheme changed

Until 2026, comparing forecourts meant driving past them. The Competition and Markets Authority found in 2023 that competition at the pump was not working properly, and recommended an open data scheme so prices could be compared without being on the forecourt.

That scheme, Fuel Finder, became statutory. Retailers must report price changes within 30 minutes, and the data is published openly. It is the same feed this site reads, which is why the prices here match the poles you drive past.

The practical effect is that the one variable retailers control — margin — is now visible. A site charging 8p above its neighbours can no longer rely on nobody noticing.

Common questions