Petrol and diesel drivers slapped with 'war premium' as Rachel Reeves nets £170m from fuel prices

Felix Reeves
Thu, 09 Apr 2026 07:50:03 +0000

British motorists have been slapped with millions of pounds in extra fuel costs as a result of the Iran war, according to fresh data.

Petrol and diesel prices continue to soar, with the latest research from the RAC showing that grim milestones have been hit for motorists at the pumps.

Drivers are now paying an average of 157.71p per litre for petrol and a staggering 190.62p for diesel, with prices soaring since the outbreak of war in the Middle East on February 28.

Fuel costs are increasing by around 0.7p and 1.2p per day for petrol and diesel, respectively, while experts warn that further hikes could be around the corner.

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Separate research suggests that drivers have worked out an extra £920million since the start of the war, with the Easter bank holiday weekend expected to bring this total above £1billion.

Data from the RAC Foundation showed that petrol and diesel drivers had netted Chancellor Rachel Reeves an extra £100million from additional VAT payments.

This initial estimate was based on data between February 28 and April 1, when the Treasury raked in £104.2million.

However, experts now estimate that this could be as high as £170million, especially with around 20 million drivers taking leisure trips across the UK over the long Easter weekend, the Daily Mail reported.

Labour has been under pressure to cut the rate of fuel duty to protect drivers from further price hikes, with the Government maintaining that it is monitoring the situation.

The 5p per litre fuel duty cut is expected to be reversed later this year after it was introduced in the aftermath of the Russian invasion of Ukraine.

Despite the fuel duty cut in 2022, both petrol and diesel prices rose to their highest ever levels, at roughly 190p and 199p per litre.

The 5p cut will be reversed by 1p in September, 2p in December and another 2p in March, at which point Chancellor Rachel Reeves could decide to hike the tax for the first time in 15 years.

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Steve Gooding, director of the RAC Foundation, noted that drivers continue to pay a "war premium" for fuel, despite a potential peace agreement being agreed between the United States and Iran.

While the Strait of Hormuz has been reopened, reports suggest that no oil and gas tankers have crossed through the strategic route, further adding uncertainty to global prices.

Mr Gooding said: "The Exchequer continues to receive tens of millions of pounds from drivers in a VAT windfall it wasn't expecting.

"Even if the price of oil begins a sustained drop, it has got a long way to go before reaching the $70 (£52) a barrel mark, which is where we were just before the conflict started."

Simon Williams, head of policy at the RAC, suggested that the "best hope" in the short term would be that fuel prices do not climb at the same rate as they have over the last six weeks.

"Drivers should not expect significantly cheaper fuel in the short term, although some smaller independent forecourts buying on a 'spot' basis may be quicker to pass on any reductions," Mr Williams added.

Motorists have been urged by experts to shop around for their fuel to ensure they find the cheapest rates in their local area.

Modelling from the Government estimated that road users could save between one and six pence per litre when using the Fuel Finder tool, which launched at the start of February.