What is the impact of increasing fuel costs on car finance post pandemic?

What is the impact of increasing fuel costs on car finance post pandemic?

Petrol prices started at £1.26 (per litre) for petrol in the first week of January 2020 just before the first UK lockdown, dropping to it’s lowest in May 2020 to £1.04 then rising back up to £1.25 in the first week of April 2021.

Go Car Credit have examined historical petrol and diesel weekly prices from Government data, and compared with crude oil prices to create a sequence of graphs to visualise these statistics.

These form a timeline of UK events during the Covid-19 pandemic from when the first lockdown started in March 2020 up until April 2021 during the UK’s third lockdown.

What affects road fuel prices at the pump?

In the UK road fuel (petrol and diesel) pence per litre prices at the pump have historically risen and fallen alongside crude oil UK values.

Historic crude oil and in turn road fuel prices have also been affected by World events and demand. The latest major world event is the Covid-19 Pandemic.

  • Road fuel costs are directly affected by the rise and fall of crude oil prices.
  • Increases and decreases in crude oil production.
  • Demand for fuel for road or air travel.
  • World events such as a pandemics or recessions.

The following graph shows how world events have historically affected the price of crude oil in the UK which in turn affects road fuel prices.

oil-diesel-petrol-prices-historic-UK

From 2014 until 2016 the price of crude oil decreased by 56.1% from 57p (per litre) to 25p due to an increase in oil production.

This also decreased petrol prices by 21.7% from £1.30 to £1.02 and diesel prices by 23% from £1.38 to £1.06.

In 2016 prices began to rise again due to decreases in oil production.

In late 2019 the first case of Covid-19 is detected in Wuhan – China as at time when oil production was being increased but demand was falling.

From the 6th of January 2020 until the 4th of January 2021:

Oil prices decreased by 26.9% from 47p to 34p, petrol prices decreased by 8.5% from £1.26 to £1.15 and diesel prices decreased by 8.8% from £1.31 to £1.19.

How road fuel prices affect car finance

As the following graphs will demonstrate road fuel and oil prices in the UK continue to rise, even though at the time of this article we are still in our third national lockdown.

If you are taking out a car finance agreement you will need to factor in road fuel costs as an expense, to make sure you can afford monthly repayments.

During the pandemic even though fuel costs have dropped and even use of your vehicle from working from home or restricted travel during lockdown.

They appear to be on the rise again so keep an eye on prices and increased travel to ensure you can afford the rise in your petrol or diesel use when applying for car finance.

The following graph shows how world events have historically affected the price of crude oil in the UK which in turn affects road fuel prices.

oil-diesel-petrol-prices-uk-pandemic-1-of-3

Road fuel prices in the UK began to drop shortly after the first lockdown was announced to Wuhan – China on the 23rd of January 2020.

The following week petrol drops to £1.27 (per litre), diesel drops to £1.32 and crude oil drops to 40p.

On the 9th of March oil prices drop even further due to a negotiation fallout in the OPEC+.

For that week petrol drops to £1.22, diesel drops to £1.26 and crude oil drops to 25p.

The UK Prime Minister announces non-essential travel was to stop on the 16th of March 2020.

For that week petrol drops to £1.20, diesel drops to £1.24 for that week and crude oil drops to 23p.

The first UK lockdown came into effect on the 26th of March 2020.

The following week petrol drops to £1.12 and diesel to £1.18 for that week and crude oil drops to 16p.

The following graph shows weekly UK road fuel and crude oil prices for 2020 until 2021, alongside UK events relating to the Covid-19 Pandemic that have increased crude oil prices.

oil-diesel-petrol-prices-uk-pandemic-2-of-3
 

Road fuel prices continue to rise from 1st of June 2020 up until the 14th of August 2020, as England starts to ease restrictions of the first national lockdown. Schools start to re-open, non-essential shops reopen and the eat out to help out scheme begins.

During this time oil prices increased by 10.9% from 28.41p to 31.50p, petrol prices increased by 5.8% from £1.05 to £1.11 and diesel prices increased by 4.5% from £1.11 to £1.16.

Road fuel prices appear to stabilise from the 14th of August 2020 up until the second lockdown is announced on the 31st of October 2020.

The final graph shows weekly UK road fuel and crude oil prices for 2020 until 2021, with markers of UK pandemic restriction easing and rising prices.

oil-diesel-petrol-prices-uk-pandemic-3-of-3
 

The stabilised prices drop slightly at the start of the second lockdown but begin to rise again during it.

Even as the third national lockdown is starting in the UK, road fuel prices are rising again inline with the increase in cost of crude oil.

When the second lockdown ends on the 2nd of December 2020 up until the 22nd of March 2020 (during the 3rd lockdown) road fuel and oil prices begin to rise:

Oil prices increased by 32.4% from 34p to 45p, petrol prices increased by 10.6% from £1.13 to £1.25 and diesel prices increased by 10.3% from £1.17 to £1.29.

Please note: All prices per litre have been rounded down from 2 decimal points for an easier read. The original data is linked to in the sources section below.

SOURCES