UK petrol · 28 September 2026
Petrol is up 42p a litre. Oil companies' profits have soared. Are they ripping us off?
The short answer: oil companies didn't choose a higher price. The Iran conflict choked off shipping through the Strait of Hormuz, so there is less oil than the world wants, and buyers bid against each other for what's left. Nothing physically stops a producer selling at the old price. But if it did, that cheap oil would be bought up and resold at the going rate, and your pump price wouldn't change. The only difference would be who pockets the extra. There are some fair criticisms too, and they're covered further down.
Showing RAC averages from 28 September 2026.
1 · The core question
If it costs no more to pump, why charge more for it?
This is the right question. A producer's costs haven't changed, so why doesn't it carry on selling at $70? It could. Nothing forces it to charge $100. But there are two reasons why it wouldn't help you if it did.
Reason 1: the cheap oil wouldn't reach you
Oil is traded around the world, and every refinery is competing for the same barrels. A producer that sells below the going rate doesn't make petrol cheaper. It hands a gift to whoever buys from it first. Move the slider to see where the money goes.
Reason 2: if everyone kept the old price, there still wouldn't be enough
Suppose every producer agreed to stick at $70. About 6% of the oil people want still can't get through Hormuz, so not everyone can have what they want. Something has to decide who goes without. If price doesn't do it, queues and empty pumps do. Each square below is 2% of the fuel people want. Compare the two options.
A rising price also helps end the shortage. At $100 it's worth tankers taking the long way round, pumping more in the US and Brazil, and releasing oil from reserves. That's largely why prices fell back to pre-war levels by June after the first spike. At a capped price, nobody has a reason to do any of that.
BP and Shell are small players
Between them they pump only around 3% of the world's oil. Most is produced by state-owned companies such as Saudi Aramco. Even if BP and Shell were generous, they couldn't move the world price.
Contracts follow the market
Most crude is sold on long-term contracts priced against Brent. When Brent goes up, the contract price goes up with it automatically. Nobody sits down and decides to put the price up.
The honest downside
Letting the price decide means people with less money cut back first. That's the real trade-off. It's why governments usually help with tax cuts or cash support rather than capping the price, which brings back the queues.
2 · Take apart a litre
Where does the money go when you fill up?
Every litre is split between five groups. Switch between February and September to see which slices grew. Then move the sliders to see how each part feeds into the pump price.
The tax multiplier. Fuel duty is a flat 52.95p a litre. VAT at 20% is then added on top of everything, including the duty. So every extra penny of oil cost becomes 1.2p at the pump, and the Treasury's take rises when prices rise.
3 · Look at it from the oil field
Why profits jump when prices do
Pumping a barrel out of the ground costs roughly the same whether oil sells for $70 or $100. The wells, rigs, staff and pipelines are already paid for. So when the world price rises, nearly all of the increase is extra profit. The companies didn't raise the price. The market did, and they benefit.
This uses an illustrative $30 a barrel to find, pump and ship oil. Real costs range from under $10 in parts of the Middle East to $40 or more in the North Sea. The pattern is the same: a fixed cost plus a price that moves means profits swing much more than prices. BP and Shell also made extra money from trading and refining in a volatile market.
4 · Supply and demand
Why a small shortage causes a big price jump
About a fifth of the world's seaborne oil normally passes through the Strait of Hormuz. Pipelines, reserves and other producers make up some of that loss, but not all of it. And people can't easily use less petrol: they still have to get to work and do the school run. When buyers can't cut back, the price has to rise a long way before supply and demand balance again.
Illustrative model. A short-term shortfall of around 5–6% is enough to push oil from $70 to about $100.
What actually happened: Brent crude over the past year
UK pump prices since this page started tracking
5 · Follow the money
Who wins and who loses
| Who | This year | Why |
|---|---|---|
| Oil producers | Big winners | Same cost to pump, much higher selling price. That includes BP and Shell, but also state-owned producers like Saudi Aramco, which pump most of the world's oil. |
| Refiners | Winners | Refined fuel, especially diesel, is short worldwide. Refiners can charge far more than usual to turn crude into fuel. |
| The Treasury | Winner | VAT is a percentage, so it collects more per litre. The Energy Profits Levy also takes a large share of profits from UK North Sea oil and gas. |
| Petrol stations | Roughly flat | They keep about the same pennies per litre. People buying less fuel and paying more card fees can squeeze them. |
| Drivers | Losers | About £22 more to fill a 55-litre petrol tank than in February, and about £30 more for diesel. |
| Everyone else | Losers | Fuel costs feed into food, deliveries and bus fares, which pushes up prices generally. |
6 · It's not all innocent
The fair criticisms
Rockets and feathers
Pump prices tend to shoot up quickly when oil rises and drift down slowly when it falls. The competition watchdog (CMA) found no sign of retailers cashing in on this crisis. It did find some were slow to pass on falls in wholesale costs, and its earlier review found supermarket fuel margins had crept up between 2019 and 2022.
Windfall profits
These profits come from luck, not from better products or harder work. That's why there's a windfall tax on UK oil and gas profits (the Energy Profits Levy). People still argue about whether it is set at the right level and whether it should cover more.
Refining margins
Refiners earn far more than usual when fuel is scarce. That isn't illegal, but it is a big part of why pump prices have risen faster than crude alone would explain. On the sliders above, refining makes up of the rise since February.
Shareholder payouts
A lot of the extra profit goes to shareholders as dividends and buybacks rather than into new supply. Many of those shareholders are pension funds, so it often ends up in ordinary people's pensions.
What you can do: prices still vary by 10p a litre or more between nearby stations. Since the government's Fuel Finder scheme started, every forecourt has had to publish its prices, so comparison apps and sites are now much more accurate.
If you only remember one thing
The short version
Oil is priced on a world market. When the Iran conflict cut supply through Hormuz, the price of every barrel went up, wherever it came from. That one event made petrol expensive and made oil producers rich at the same time. They didn't put the price up to get rich. The higher price made them rich.
Why not keep selling at the old price? Because the price isn't set by any one seller's costs. It's set by buyers around the world competing for oil that has become scarce. A producer that sold cheap would only enrich whoever bought from it first. If everyone held prices down, there still wouldn't be enough oil, and queues would decide who goes without instead.
Nearly half of what you pay is tax, and the VAT part grows as prices rise. Refiners are the other big winner. The reasonable complaints are about how slowly prices come back down, and whether windfall profits are taxed enough.