Government faces pressure on fuel duty as price hikes hit hauliers

Industry trade groups are urging the UK government to mitigate the effect on businesses of significant diesel and petrol price increases since the start of the United States’ war with Iran, including through changes to fuel duty.

Last week the RAC Foundation reported that UK drivers had already paid an additional £307 million for diesel and petrol since the conflict began. It charted the rise in prices since 27 February, the day prior to the outbreak of hostilities, when the average UK diesel pump price was 142.4 pence per litre. By 23 March, it had reached 169.8p per litre. As of yesterday, the Foundation was citing average prices of 178.7p per litre for diesel, and 151.p per litre for petrol.

The government insisted earlier in March that it was delivering a “clear message” to fuel suppliers that they must provide “a fair deal at the pump”, as the chancellor Rachel Reeves and energy secretary Ed Miliband met with retailers to press them on the steps they were taking to keep prices down.

The Treasury also reported that the chancellor had written to the Competition and Markets Authority (CMA), the UK’s competition watchdog, asking it to crack down on road fuel “rip-offs”. She warned that she would “not tolerate” firms exploiting the situation to “to make excess profits at consumers’ expense”.

Retail groups objected to some of the rhetoric from ministers, arguing that suggestions of profiteering were unjustified. Some critics also accused the government of deflection given its planned fuel duty increases, including a 1p per litre rise scheduled for September – though the prime minister said this would be kept under review. On 24 March in a parliamentary statement, Rachel Reeves promised an “update on fuel pricing within the next month”, and said the CMA had “stepped up its statutory monitoring” of prices.

In addition to the rise scheduled for September, fuel duty rises of 2p in December and a further 2p in March 2027 are also planned, the three together representing a phased reversal of an earlier 5p per litre cut implemented by the Conservative government.

Challenged by Sky News on whether the government would reverse the planned hike, the education secretary Bridget Phillipson said on Sunday that there was “no need” to announce such a measure at this stage, stating that the government would take a position “closer to the time”.

“I’m not going to commit months ahead of time when there isn’t a need to act right now, because those protections remain in place,” she said, referring to the current fuel duty freeze which has been in force since 2011.

But last week the Road Haulage Association (RHA) said the chancellor had missed an opportunity “to cut fuel duty and reassure key sectors like ours”.

“In terms of fuel price scrutiny, we’re clear that this must not stop at the forecourt,” said Richard Smith, RHA managing director.

“Our essential industry is a key economic enabler. That is why we have been calling for the planned fuel duty rise to be scrapped, along with any link to future inflation rises. Such a rise would be a hammer blow for many firms.

“We are also calling for an essential fuel user rebate for commercial vehicles. These are sensible measures that would give businesses much-needed confidence at this uncertain time.

“We need to see action from government. We want to meet with the chancellor urgently to discuss these matters in greater detail.”

In its 24 March analysis, the RAC Foundation said the direct cost to UK drivers of the war was “expected to rise further as current barrel prices for oil feed through to the price of petrol and diesel at the pumps”.

Steve Gooding, the organisation’s director, said: “Even if the conflict was resolved tomorrow the pain at the pumps will be felt for weeks to come, or longer, due to the time lag between changes in the barrel price of oil and what fuel costs at the pumps, and the time it will take to repair the war damage to oil production, refining and distribution.”

Dr Richard Osborne, a technical expert on sustainable engines at consultancy Ricardo, observed: “In February 2026 the average UK pump price was £1.32 for gasoline/petrol and £1.41 for diesel. Correcting for inflation (CPI), I believe these were the lowest prices in real terms since 1998 for gasoline and 2000 for diesel.

“Retail prices are of course made up of fuel costs and taxes (fuel duty and VAT in the UK). Higher-tax countries are therefore proportionately less exposed to oil shocks. Fuel duty has increased over the last 25 years, but at the same time has reduced significantly as a share of the pump price. This has not been obvious from newspaper front pages.

“In a time of energy transition, policymakers need to communicate honestly that fuel tax revenue will ultimately be replaced by something else, probably road charging. eVED has not been a good start.

“I think this is also an opportunity to differentiate taxes between fossil and sustainable fuels, on the basis of life-cycle greenhouse gas emissions. This could start now with HVO, and in the future could include advanced biofuels and e-fuels.”

According to a Daily Telegraph article published in mid-March, supermarket giant Asda had by that stage raised its petrol prices faster than any other major retailer since the outbreak of the conflict, and diesel prices by almost 20p per litre over a two-week period. Citing “an unprecedented period of ongoing volatilty with wholesale costs rising sharply”, a spokesperson for Asda said it was: “committed to keeping prices as low as possible for customers, with prices for both unleaded and diesel currently averaging three pence per litre below the UK market average.”

Fleet operators contacted by Transport Operator suggested that fuel card prices had seemed to increase even faster than posted forecourt prices at the start of the conflict, while there had been some lag in bulk prices.

Last week Gordon Balmer, executive director of the Petrol Retailers Association, highlighted the move by the Republic of Ireland’s government to make significant cuts to excise duty on diesel and petrol until the end of May, and called on the UK to introduce similar measures.

“I am not going to allow politicians to make scapegoats of British forecourt operators, by making inflammatory and unjustified accusations of profiteering,” he said. “The fact is that for every litre of petrol sold by retailers, less than five per cent is retained as profit, while the government receives around 55 per cent of the money raised from petrol sales from fuel duty and VAT.” He added: “The chancellor needs to abandon her plan for a 5p rise in fuel duty and announce immediate short term cuts, in line with Eire.”

Alongside demands on fuel duty, the RHA had also been calling for new minimum payment terms across supply chains, to help protect operators’ cashflow. In late March, the Department for Business and Trade announced some changes in this direction, including a new 60-day cap on payment terms for large companies when paying smaller suppliers.

New mandatory interest will also be introduced on late payments, and the small business commissioner will be given sweeping new powers to investigate lacklustre payment practices, adjudicate in disputes and fine the worst offenders.

While welcoming the move, the RHA’s Richard Smith said the government could have gone further.

“Late payments costs the UK economy an estimated £11bn every year and puts small businesses at a competitive disadvantage,” he said. “We’ve long called for stronger safeguards on payment terms to protect business against unscrupulous practices. This measure will offer some relief to haulage, coach and van operators grappling with huge fuel price increases, but ministers could have gone further and set the cap at 30 days to further ease their cashflow challenges.”