How UK Petrol Prices Are Set: From Crude Oil to the Forecourt

OPEC (the Organisation of the Petroleum Exporting Countries) and its extended alliance OPEC Plus control approximately 40% of global crude oil production. Their quarterly meetings, at which member countries agree production quotas, are the most watched events in commodity markets.

When OPEC announces production cuts — as it did repeatedly between 2022 and 2024 — global crude supply falls, prices rise, and UK pump prices follow within days. When OPEC increases output, the opposite occurs, though prices fall more slowly due to the well-documented 'rockets and feathers' asymmetry.

Key OPEC members include Saudi Arabia (the swing producer with the most influence), the UAE, Iraq, Kuwait, and Iran. OPEC Plus includes Russia, the world's third-largest producer. When Russia's oil revenues were targeted by Western sanctions following the 2022 Ukraine invasion, the resulting supply uncertainty drove crude prices to multi-year highs — contributing significantly to UK pump prices exceeding 190p per litre in summer 2022.

The UK itself produces around 600,000 barrels per day from the North Sea, but consumes approximately 1.2 million barrels per day. The gap is met by imports, meaning UK prices are substantially driven by international market conditions rather than domestic production.

Rotterdam in the Netherlands is the largest port in Europe and the primary trading hub for oil products serving the UK and Western European markets. The 'ARA spread' (Amsterdam-Rotterdam-Antwerp) is the benchmark price for refined products in Europe — when commentators talk about wholesale petrol prices, they're typically referring to ARA spot prices.

Most UK refineries are supplied via tanker from Rotterdam or directly from crude producers. UK refineries (Stanlow in Cheshire, Humber near Grimsby, Fawley near Southampton, and Grangemouth in Scotland) process crude into petrol, diesel, jet fuel, and other products.

UK wholesale prices are closely correlated with ARA spot prices, adjusted for shipping costs and exchange rates. Because crude is priced in US dollars and ARA prices are typically quoted in dollars per tonne, the GBP/USD exchange rate plays a significant role in UK pump prices. Sterling weakness directly translates to higher wholesale costs in pounds, independent of any movement in the dollar price of crude.

In 2023, the Competition and Markets Authority (CMA) conducted a major review of UK road fuel markets. The review found evidence of reduced competition, declining price transparency, and insufficient pass-through of wholesale price reductions to consumers — particularly by supermarkets, which the CMA found had increased their retail margins since 2022.

The CMA's primary remedy was to mandate real-time price transparency: all forecourts with significant throughput are required to report their prices to a central database at least every 30 minutes. This data is made available via the Fuel Finder API, which any developer or application can access.

The impact has been significant. Apps and websites using the Fuel Finder data — including WorthThePump — allow consumers to compare prices across dozens of local stations before leaving home. This 'search cost reduction' is exactly what the CMA intended: more price-aware consumers create competitive pressure on retailers to offer better prices.

The CMA also committed to monitoring whether the price transparency intervention delivered consumer savings, with a follow-up review planned for 2025. Early evidence suggests supermarket margins have modestly compressed following the mandate.

Supermarket petrol stations — Tesco, Asda, Morrisons, Sainsbury's — are almost always cheaper than branded forecourts (BP, Shell, Esso, Texaco) or independent garages. This isn't coincidence; it reflects a deliberate pricing strategy and structural cost advantages.

Loss-leader strategy: Supermarkets use fuel as a footfall driver. A customer who fills up at Tesco is statistically likely to also shop in-store. The supermarket can sacrifice some margin on fuel because it's recovered through grocery sales. Branded forecourts and independents don't have this cross-subsidy.

Volume purchasing: Supermarket chains buy fuel in enormous volumes and have the negotiating power to secure advantageous wholesale rates. An independent forecourt buying a few tanker loads per week has no such leverage.

Lower brand premium: Branded fuel stations (Shell, BP) charge a premium partly for their brand, partly for proprietary additive packages. Supermarket fuel meets exactly the same regulatory specifications (EN 228/EN 590) but without the brand premium.

Why rural areas pay more: Rural forecourts often have lower volume, higher distribution costs (longer road tanker distances), no supermarket competition within a viable catchment area, and older infrastructure. The CMA noted that rural pricing tends to be higher and that the Fuel Finder transparency mandate may have less competitive effect in areas with only one or two local stations.