Crude oil is not cheaper in pounds now than in 2008

16 June 2022
What was claimed

The oil price today is £96 a barrel as petrol approaches £2 per litre. In June 2008, it hit £109 a barrel yet petrol was £1.19 per litre.

Our verdict

While some of these figures are broadly correct, this post does not account for changes in currency exchange rates. As a result, it is not true that crude oil is cheaper in pounds now than in 2008.

A Facebook post claims that while the price of petrol has increased to nearly £2 per litre, the price of crude oil is lower than it was 14 years ago, when petrol was £1.19 a litre.

A TikTok video sharing the same figures has also been circulating on social media.

The current crude oil price is lower than it was in 2008 in US dollars, which is the currency it is traded in. In pounds sterling, however, the price of crude oil is actually higher than it was in 2008, because the exchange rate between these currencies has changed, which the figures shared in these posts do not take into account.

The price of fuel compared

On 8 June, when the post was published, the average price of unleaded petrol in the UK was £1.82 per litre and the average price of diesel was £1.88 per litre, according to the RAC.

Fuel prices in the UK are rising, and last week it was reported that the price at some petrol stations had temporarily reached £2 per litre, though most motorists are not currently paying that much.

In the week to 30 June 2008, the RAC reports the average price of unleaded petrol was £1.19 and the average price of diesel £1.32—the highest recorded prices that month.

So the post is broadly right to note that the petrol price is now higher than it was in June 2008.

Crude oil prices

While the price of Brent crude oil—the global benchmark for crude oil prices— is currently lower than it was in 2008 in US dollars, in pounds the price of crude oil is actually higher than it was in 2008.

This is because the pound has weakened significantly against the dollar since June 2008, which effectively makes each barrel of crude oil more expensive in pounds now than 14 years ago.

This means the Facebook post is wrong to suggest that in the UK fuel prices have increased while oil prices have decreased. In fact, in pounds, both have increased. 

Following the Russian invasion of Ukraine on 24 February oil prices reached $139 per barrel on 8 March. The price of crude oil on 8 June was around $122 per barrel, or £97, having risen once again in recent weeks after falling from its March peak, contributing to the increase in fuel prices currently being seen across the UK.

In June 2008, oil prices peaked at around $142 per barrel towards the end of the month. Based on the exchange rate at the time, this would put the price at around £73 per barrel, lower than it is today.

Using current exchange rates the dollar price of crude oil in June 2008 would work out at around £116. This is much closer to the Facebook post’s figure of £109 and it is possible the post’s figure was calculated by converting a slightly different barrel price from June 2008 using the current exchange rate.

Breaking down fuel costs

The price motorists pay for fuel is not just for the wholesale cost of the fuel itself. It is also composed of fuel delivery charges, retailer margins and government taxes (fuel duty and VAT).

At the time of writing, 45% of the price of petrol is accounted for by government taxes. According to the RAC Fuel Watch, 52.95 pence of a current average litre of petrol costing £1.85 is accounted for by fuel duty, with 30.84 pence accounted for by VAT, which is paid at a rate of 20%.

This very roughly lines up with the costs mentioned in the Facebook post, which said that of £100 spent on a tank of fuel, £32.74 was spent on fuel duty, and £16.67 on VAT, though these are slightly too high.

The breakdown of diesel fuel costs is broadly similar.

By comparison, in 2008 fuel duty on petrol stood at 50.35 pence per litre, and VAT was 17.5%.

In March 2022 the government announced a temporary reduction in fuel duty of 5 pence per litre with immediate effect, though whether this decrease is being passed on to motorists by retailers is currently the subject of some debate.

Image courtesy of Erik Mclean

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