Economists say the decision by Britain and other G7 countries to release 100 million barrels of oil and diesel could reduce pain at the pump for drivers
Diesel prices could drop by up to 6p a litre thanks to Britain and other countries raiding their fuel reserves, say economists.
G7 countries last week agreed to release 100 million barrels of diesel and oil from emergency stockpiles after pressure from US President Donald Trump. He had threatened to ban exports of diesel from the US unless other countries took action.
The prospect of a block on shipments of the fuel from the States had contributed to a spike in diesel prices recently, adding to pain at the pumps for drivers since the start of the US-Iran war at the end of February.
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The RAC says the nationwide average for diesel has topped £2 a litre – at 200.20p – an all-time high. Many forecourts are charging much more, while diesel at motorway services now averages 216.20p a litre. Unleaded has not risen as fast but still stands at an average 174.94p across the UK.
Analysts at Pantheon Macroeconomics said the G7 release of diesel and oil could take some of the heat out of rising inflation in the UK. There are reports that European countries would contribute around half of the 100 million barrel release, accounting for 11 days of use in the EU.
“If fully reflected in UK costs and passed through (it) would lower UK diesel pump prices by 5p to 6p a litre, or 2.5%,” Pantheon said.
Simon Williams, the RAC’s head of policy, said the cost of filling up an average family car with diesel was now £110, almost £32 more than it was at the start of the US-Iran war.
“This will be very challenging for households and companies that drive a lot of miles, from commuters, haulage and delivery firms, businesses with large fleets all the way through to sole traders. In a cruel twist, it’s diesel vehicles, which were once considered the most cost-effective option for lengthy journeys, that are now burning a hole in people’s pockets,” he said.
President Trump is desperate for pump prices to fall in the US as voters head to the polls in next month’s mid-term elections.
On Monday he announced a temporary easing of limits of the use of tax exempt red diesel, which is generally used by farmers and in the construction industry.