24th December 2025
A key driver of pump prices in the UK is the global price of crude oil. Analysts forecast that oil prices after rising in 2025 may pressurise downward or stay relatively subdued in 2026 due to oversupply concerns and slower demand growth.
Recent oil industry outlooks point to potential oversupply and structural weakness in 2026, as production outpaces demand growth globally, which would typically put downward pressure on crude prices.
Some major forecasts have suggested Brent crude could average lower by 2026 compared with earlier years — which, if sustained, can feed into lower wholesale fuel costs.
If these forecasts hold, wholesale costs for petrol and diesel will be less volatile or gently declining — a supporting factor for lower or stable UK pump prices.
Recent trends show domestic price increases, but some forces could ease this in 2026
While markets are mixed, RAC data in late 2025 showed petrol and diesel rising sharply through November, reaching some of the highest seasonal levels since spring.
However:
Wholesale petrol costs have previously fallen when global oil prices dropped — demonstrating that pump prices can come down if the wholesale market weakens.
Government statistics and forecasts show that overall UK inflation is expected to decline through 2026, which could help mitigate other upward cost pressures that feed into fuel pricing.
So even if pump prices remain elevated compared with pre-2020 levels, the rate of increase could slow or even reverse if oil prices weaken.
UK government policy will directly influence prices in 2026
Taxation is a major component of what drivers pay:
The UK government has extended the temporary fuel duty cut (a 5p per litre reduction) into 2026 meaning motorists benefit from lower tax on petrol and diesel until at least March or September 2026 depending on the policy update.
After the cut expires, duty is expected to return gradually likely adding a few pence per litre later in 2026 but major increases are not forecast in the near term.
This extension helps counterbalance potential wholesale price rises, cushioning what drivers pay at the pump, especially in the first three quarters of the year.
Market competition and margins may continue to shape retail prices
The UK's Competition and Markets Authority (CMA) has noted that retailer fuel margins remain unusually high, which means that pump prices don’t always fully track changes in wholesale costs.
This "rocket and feather" effect — where prices rise quickly when oil goes up but fall more slowly when it drops — could limit how much prices fall even if crude weakens.
However, the rollout of tools like a “fuel finder” scheme to increase price transparency may boost competition at forecourts in 2026, potentially helping downward pressure on prices over time.
What this means for UK drivers in 2026
Likely scenarios for 2026:
Stable to gently lower prices early in the year
If global oil prices weaken or remain subdued, and with the duty cut in place, average petrol prices could ease slightly or be less volatile, especially in the first half of 2026.
Pump prices may remain relatively high
Even if crude prices fall, retailer margins and fixed costs could limit how far prices drop, meaning petrol might still be pricey compared with pre-recent-crisis levels.
Moderate rises later in 2026
Once the fuel duty cut expires or is reversed later in the year, pump prices could tick up by a few pence per litre, assuming oil pricing doesn’t compensate with a sharp fall.
Drivers should watch key factors
Crude oil market trends — especially supply/demand balances and geopolitical tensions.
Government fiscal policy on fuel duty and taxation.
Wholesale cost transmission to the pump, influenced by competition among retailers.
In 2026, UK petrol prices are likely to stabilise or even ease somewhat early in the year if global oil prices soften, helped by continued duty cuts. However, higher than historical pump prices may persist due to retailer margins and tax components, and some moderate increases are possible later in the year once tax relief measures unwind.