Finance16 September, 20263 min read
UK Inflation Jumps to 3.1% as Gasoline and Diesel Prices Surge
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UK inflation rose to 3.1% in August, up from 2.9%. Gasoline and diesel prices surged, motor fuel up about 23% year-on-year.
Inflation jumps on fuel
UK inflation rose to 3.1% in August from 2.9% in July, with the Office for National Statistics saying the increase was pushed by surging gasoline and diesel prices. The ONS said motor fuel costs surged 23% year-on-year, and between July and August the average price of gasoline rose by 9.1 pence ($0.12) per liter to 161.3 pence per litre. Diesel prices rose by 14.2 pence per litre in August to an average of 181.8 pence per litre, and the BBC said petrol prices jumped to their highest for nearly four years.
“Inflation accelerated to 3.1% from 2.9%, according to the Office for National Statistics (ONS).”
The BBC linked the rise in petrol and diesel to the conflict in the Middle East disrupting global oil supplies, and it said oil hit more than $91 a barrel as the US-Israel war with Iran went on. The BBC also reported that the ONS said the price of filling up a vehicle soared in August, with the ONS adding that petrol prices were at their highest price recorded since November 2022.
Policy debate and voices
The BBC said the rise in inflation moved further away from the Bank of England’s 2% target, with the rate currently standing at 3.75% and the Bank meeting on Thursday to decide whether to change it.
Grant Fitzner, chief economist at the ONS, said: "Rising crude oil and petrol prices increased both the annual cost of raw materials and the price of goods leaving factories respectively."
Shadow chancellor Andrew Griffith said the government’s "jobs tax and employment red tape are being passed on to consumers in the weekly shop and their mad energy policies are pushing up costs and leaving Brits exposed".
Chancellor John Healey said: "The war in the Middle East is impacting on inflation worldwide, not just here at home. In our bills, our weekly shop and at the petrol pumps."
The BBC reported that Capital Economics said the effect of higher oil prices had not spilled over into other areas such as food and drink, where inflation remained at 1.3% in the year to August.
What’s at stake next
The BBC said the Bank of England uses interest rates to control inflation, and it reported that the Bank was meeting on Thursday as markets weighed whether to change policy after the August print.
“When the price goes up, we have to go up with it. There's no way around it.”
The BBC quoted Goran Raven, owner of Essex petrol station RJ Raven, saying: "When the price goes up, we have to go up with it. There's no way around it."
Raven told the BBC that fuel margins were "wafer-thin" and said the station needed a tanker almost every day because it had "small tanks" and had to pay a daily spot price.
Yael Selfin, chief economist at KPMG, told the BBC that if gas prices remain around current levels, household energy bills could rise by a further double-digit amount from January, with an even larger increase possible if wholesale prices climb further.
The BBC also reported that the government is cutting VAT on household electricity bills from 5% to zero on 1 October, saving a typical household about £45 a year, while the price cap on both electricity and gas bills will rise by 4% so a home using a typical amount will pay £60 a year more.