The UK’s diesel market has entered unprecedented territory, with the average forecourt price reaching an all-time high and moving ever closer to the psychologically significant £2-a-litre mark.
According to the latest figures, the average price of diesel has risen to 199.18p per litre, narrowly surpassing the previous record of 199.09p set in June 2022. The latest surge has been driven by continuing disruption and uncertainty in global oil markets, with tensions in the Middle East and concerns around supplies of refined diesel adding further pressure to wholesale costs.
For motorists, the impact is immediate. For forecourt retailers, however, the consequences are more complicated. Record pump prices do not automatically translate into higher profits. In fact, with wholesale costs rising rapidly and retail margins already under pressure, operators are having to navigate a difficult balancing act between protecting their margins, remaining competitive and keeping customers coming through the forecourt.
A volatile market
The speed at which prices have moved has been particularly challenging for retailers. Data from the Government’s Fuel Finder database shows just how volatile the market has become. More than 102,000 fuel price increases were recorded by UK forecourts during September, around four times the number seen throughout August.
Diesel has accounted for a significant proportion of those increases, with more than 54,500 diesel price rises recorded during the month to September 22. The figures demonstrate the pressure retailers are facing as wholesale costs move sharply upwards.
The average diesel price had already reached 197.31p a litre by September 23, up by almost 55p since the end of February. By the end of the month, the national average had moved beyond the previous record.
For forecourt operators, this creates a difficult pricing environment. Retailers need to respond to wholesale increases quickly enough to avoid eroding margins, but frequent price changes can make it harder to maintain customer confidence and competitiveness, particularly in areas where several forecourts are operating within a relatively small geographical area.
Margins under pressure
One of the biggest misconceptions surrounding record pump prices is that retailers automatically benefit when the price of fuel rises, the reality is very different.
The retail price motorists see at the pump includes the cost of the fuel itself, fuel duty and VAT, as well as the retailer’s margin. When the wholesale cost increases sharply, retailers can find themselves absorbing some of that increase while deciding how quickly to adjust their pump prices.
Recent industry analysis suggests diesel margins have remained below their six-month average, limiting the ability of retailers to absorb further wholesale increases. That means a £2-a-litre diesel price does not necessarily represent a £2-a-litre opportunity for the forecourt. The higher the underlying wholesale price, the more working capital is required to keep tanks full.
For independent retailers in particular, cash flow can become an important consideration. A forecourt selling tens of thousands of litres every week may need significantly more money tied up in fuel stock when the wholesale price rises by several pence per litre.
The knock-on effect on the shop
The impact of rising diesel prices could extend well beyond the pumps. Forecourts are increasingly dependent on their convenience offer, with food-to-go, groceries, coffee, alcohol, tobacco alternatives and other categories helping retailers build a more diversified business.
But many of the products sold in those stores have to reach the forecourt by road. As diesel becomes more expensive, haulage companies, distributors and suppliers face higher operating costs. Those costs can eventually filter through the supply chain, increasing the cost of getting products from manufacturers and distribution centres to stores.
The same applies to customers. Higher diesel prices affect tradespeople, delivery drivers, farmers, logistics operators and commuters. For motorists who rely on their vehicles for work, a significantly more expensive tank of fuel can mean less disposable income to spend elsewhere.
That could create a challenging environment for forecourt retailers, particularly where customers are already feeling the squeeze from higher household costs. At the same time, there could be opportunities for stores that make it easier for customers to combine their fuel stop with other purchases. A customer who is already stopping to fill up may be more inclined to buy food, drinks or essential groceries at the same time, particularly if the store offers convenience, competitive pricing and a strong range.
What happens next?
The Government’s approach to fuel duty will be another important factor for retailers to watch. The current 5p-per-litre fuel duty cut has been extended until the end of December 2026. Under the existing legislation, fuel duty is scheduled to begin moving back towards its previous rate from January, with a further increase planned for March.
However, with diesel prices already at record levels, the Chancellor has indicated that soaring fuel costs will be taken into account when finalising the October Budget. Any decision to maintain the current fuel duty reduction could provide some relief for motorists and businesses.
Conversely, allowing the planned increases to go ahead would add further pressure at a time when pump prices are already exceptionally high. For forecourt retailers, the Budget therefore has the potential to become another major factor in an already unpredictable fuel market.
Managing the challenge
There is little any individual forecourt retailer can do to influence the global price of crude oil or the availability of refined diesel. What operators can control is how effectively they manage the business around those pressures.
Monitoring competitor pricing, understanding local demand and keeping a close eye on margins will remain essential. Retailers may also need to look carefully at stock management and cash flow as the value of fuel held on site increases.
Most importantly, the current situation reinforces the importance of the forecourt shop. Fuel remains the reason many customers visit, but the wider retail offer can help determine how valuable each visit becomes. Food-to-go, coffee, meal solutions, impulse purchases and essential groceries can all play a role in increasing spend beyond the pump.
Record diesel prices are therefore more than a headline figure. They represent another significant test for an industry already operating against a backdrop of rising costs, changing consumer habits and increasingly volatile global markets.
With diesel now sitting just below £2 a litre on average, forecourt retailers will be watching the wholesale market, the Budget and customer behaviour closely. For now, the priority is likely to be finding the right balance: staying competitive at the pump, protecting already-tight margins and making sure the shop remains a compelling reason for customers to stop, spend and return.
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