2017 was a volatile year both politically and for fuel costs so as we see 2017 disappear in the rearview mirror what does the year ahead hold? What will drive fuel prices in 2018 and what can you do to stay ahead of the curve?
The last 12 months saw a considerable increase in fuel prices with an almost 7 pence rise in the price of the diesel from the start of 2016. The year was dominated by Brexit Negotiations, a new President of the United States, a snap General Election, natural disasters, unrest in the Middle East and the value of the pound.
It’s impossible to pinpoint every single fluctuation and attribute each event to fuel prices, but it does give us a chance to speculate about what the year ahead has in store.
The Brexit result was, without doubt, a seismic shift that has continued to leave the nation with an uncertain future. The year ended with no real plans firmly in place, so we go into 2018 with negotiations on-going, the volatility of fuel prices will still be at the mercy of politics.
Between January 2016 and the June referendum, fuel prices rose by 10p a litre. When voters ultimately chose to initiate the process to leave the EU, it led to a fall of 20% in the value of the pound against the dollar.
Depending on how negotiations go in 2018 there is still the potential that we will see further increases or deductions in the value of the pound. In turn, we could see even more volatility in the market with Brexit negotiations to continue until 2019 which again will leave fuel prices at the mercy of a volatile market.
Data in a report on Petrolprice.com highlighted the fact fuel prices went up by less than a 0.3p per litre in July, then went down by 1.4p per litre in August. Fuel prices did start to rise in September, but this was driven my wider factors such as the increase in the cost of crude oil per barrel.
Ultimately until 2019 when we know the outcome of the new trade deals the UK are involved in the future is uncertain. With the possibility of deals with Saudi Arabia, the price of fuel at the forecourts could be at the forefront of negotiations.
The 2017 snap general election produced more uncertainty in the UK economy and caught many political observers by surprise. The unexpected outcome resulted in a further drop in the pound which meant a drop to 113.9p in petrol prices leading up to the general election when the result looked like a win for the Conservatives. However, the uncertainty after (amongst other things) led to a rise to 118.9p in the following weeks.
If there was another snap election in 2018, according to many polls this will likely be another hung parliament. Whatever the result it would likely lead to the further decrease in the value of the pound which could increase petrol prices.
Obviously, it wasn't just political change this side of the pond that had serious fuel price ramifications, Donald Trump winning the US election threw a massive curve ball into world politics and his policies had an immediate knock-on effect.
He has previously shown his support for shale oil extraction and hydraulic fracturing and although there was no initial change in prices for his inauguration in January 2017, by February OPEC had decided to reduce oil production in anticipation of a likely increase in US oil output.
This decision saw average prices rise by 5p a litre so the world will continue to watch President Trump with interest in 2018 to see if any of his domestic or international policies put fuel in the spotlight.
There was a considerable amount of speculation that Chancellor Phillip Hammond would introduce a rise on fuel duty particularly for diesel cars in 2017. Ultimately this plan didn't come to fruition, and a price freeze was kept on fuel.
To encourage people to give up their diesel cars is likely to continue to be a key environmental policy of the government, which could mean the expected taxes on diesel cars could be introduced in the next budget. Mr. Hammond's words certainly indicated it would be high on the agenda.
'The government is committed to improving air quality, and will consult on a detailed draft plan in the spring which will set out how the UK’s air quality goals will be achieved,' the official Spring Budget document confirmed.
'Alongside this, the government will continue to explore the appropriate tax treatment for diesel vehicles, and will engage with stakeholders ahead of making any tax changes at Autumn Budget 2017.'
The increasingly complex on-going issues in the Middle East will continue to have an impact on fuel prices in 2018, and with no indications that conflicts will end anytime soon, it will be another year of political transition.
Many of the previous factors mentioned can be analysed and monitored closely, but one potential fuel price-defining factor is impossible to predict with any accuracy.
Natural disasters like 2017’s Storm Harvey don't just have a devastating impact on communities, but their destruction can cause substantial increases to fuel prices.
Storm Harvey forced large refineries in the Gulf Coast to close which drove up US demand for petrol imports. That impacted the UK with the price of unleaded rising by 4p a litre.
With increasingly unpredictable global weather patterns it’s highly likely that 2018 will see fuel prices impacted once again.
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