By our calculations, motoring in Britain has rarely been so cheap

Despite rising petrol prices after Iran war, UK driving costs remain near historic lows due to taxes, efficiency gains and cheaper real fuel.

THE WAR in the Middle East has been quick to reach Britain’s shores. Within two weeks of bombs dropping on Tehran, the average price of petrol at forecourts rose by 8p to £1.40 ($1.90) a litre, the highest for 18 months. The price of diesel—which fuels 40% of vehicles in Britain—rose by 17p to £1.59 a litre. Cue a chorus of calls for the government to come to stricken motorists’ aid. Yet by The Economist’s calculations, it has rarely been

THE WAR in the Middle East has been quick to reach Britain’s shores.

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The cost of fossil fuel accounts for only around 40% of the retail price of petrol. Another 10p per litre covers retailers’ costs and margins. The Treasury adds 53p per litre for fuel duty and a further 20% for VAT, which helps make petrol twice the price of America’s. But because fuel taxes in Britain are so high, pump prices are less responsive to gyrations in global oil markets. Deflate petrol by consumer prices and the real price of fuel in the three months before the war in Iran was lower than at any time since March 2002.

Thankfully, unlike the gas-guzzlers that choked the roads during the oil crises of the 1970s, modern machines are far more fuel-efficient. Although not everyone drives a new car, the average fleet-wide fuel efficiency of Britain’s vehicles has improved by two-thirds over the past three decades. Couple that with the lower real cost of petrol, and in February the average petrol car could travel 100 miles (160km) on £12-worth of fuel, cheaper than at any time since comparable data began in 1990 (see chart).

What is more, the cost of buying and maintaining a car is lower than it has ever been. According to official statistics, the real value of car expenditure (other than fuel) has fallen by 20% since 2000. The transition to electric vehicles (EVs), which now account for 6% of the country’s fleet, will make motoring cheaper still. Charged at home, an EV costs around £5-8 to drive 100 miles.

Motoring would not be so cheap today had successive governments not frozen fuel duty since 2011. Another 5p cut followed Russia’s full-scale invasion of Ukraine in 2022. The giveaways have cost taxpayers £120bn. The Treasury has committed to adding the 5p back in September and reinstating the escalator that indexes fuel duty to inflation. But the government may struggle to resist pressure to perform another U-turn.

Correction (March 20th 2026): An earlier version of the chart in this article slightly underestimated the cost of driving diesel cars by 0.5% on average.

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