Why Do Fuel Prices Vary So Much Across the UK?

What Makes Up the Price of Fuel?

Before looking at why prices differ between forecourts, it helps to understand what you are actually paying for when you fill up. The price of a litre of fuel in the UK breaks down into four main components.

Fuel Duty

Fuel duty is a fixed tax charged per litre, currently set at 52.95 pence. This is the same at every forecourt in the country — it does not vary by region, brand or fuel type (petrol and diesel pay the same rate). Fuel duty alone makes up roughly 37 to 40 percent of the pump price.

VAT

VAT at 20 percent is charged on the total price, including the fuel duty. This means you are effectively paying tax on tax. VAT adds another 22 to 24 pence per litre at current prices, bringing the total tax component to around 75 to 77 pence — more than half the pump price.

Wholesale Cost

The wholesale cost of fuel — the price retailers pay to buy petrol or diesel from refineries — typically accounts for 40 to 45 pence per litre. This fluctuates with global oil prices, the dollar-sterling exchange rate, and refinery supply and demand. When you hear that oil prices have risen or fallen, this is the component that changes.

Retailer Margin

The retailer's margin — what the forecourt operator actually earns — is typically just 5 to 10 pence per litre. This is where all the variation between stations comes from. Fuel retailing is a low-margin business, and the factors that push this margin up or down are the main reason prices differ between forecourts.

Why Prices Differ Between Stations

Local Competition

Competition is the single biggest driver of price differences. In areas where several forecourts are clustered together — a supermarket, a branded station and an independent all within a mile — prices are pushed down as retailers compete for custom. In areas with only one filling station serving a wide catchment, there is little competitive pressure and prices tend to be higher.

This is why urban areas generally have cheaper fuel than rural ones. It is not because cities are closer to refineries (though that can help), but because drivers in cities have more choices and can easily switch to a competitor.

Proximity to Refineries and Terminals

The UK has six major refineries: Fawley (Hampshire), Stanlow (Cheshire), Grangemouth (central Scotland), Lindsey (Lincolnshire), Pembroke (Wales) and Humber (North Lincolnshire). Fuel is distributed from these refineries and from import terminals by pipeline, rail and road tanker.

Stations near refineries and major distribution terminals benefit from lower delivery costs. Those in remote areas — the Scottish Highlands, rural Wales, Cornwall, the Lake District — pay more for tanker deliveries because the distances are greater and the roads are slower. This delivery premium can add 2 to 5 pence per litre.

Property Costs

Running a forecourt in central London, where commercial rents and business rates are among the highest in the country, costs far more than running one in a northern market town. These costs have to be covered by the margin on each litre sold. Higher overheads mean higher pump prices.

Brand and Business Model

Supermarkets (Asda, Tesco, Sainsbury's, Morrisons) treat fuel as a loss leader or near-loss leader — they price it cheaply to attract shoppers into their stores, where the real profits are made on groceries. This is why supermarket forecourts are consistently 5 to 10 pence cheaper than branded stations.

Branded stations (Shell, BP, Esso) have higher operating costs — franchise fees, premium fuel ranges, more extensive facilities — and target a different margin. Independent stations set their own prices based on local conditions and may be cheap or expensive depending on competition and overheads.

Motorway Services: A Special Case

Motorway service stations are typically 15 to 25 pence per litre more expensive than nearby off-motorway alternatives. This premium exists because motorway service operators charge very high rents to fuel retailers, and because drivers on the motorway have limited alternatives — if your fuel light is on, you have little choice but to stop.

The CMA has repeatedly highlighted motorway fuel pricing as a concern, and the 2026 transparency scheme now makes it easier for drivers to see just how much extra they are paying. The simple advice: fill up before joining the motorway whenever possible.

The "Rocket and Feather" Effect

One of the most frustrating aspects of UK fuel pricing is the so-called "rocket and feather" effect. When wholesale oil prices rise, pump prices go up quickly — like a rocket. When wholesale prices fall, pump prices come down much more slowly — like a feather drifting to the ground.

This asymmetry has been documented by the CMA and the RAC Foundation. It means that retailers are quicker to pass on cost increases than cost decreases, effectively boosting their margins during periods of falling wholesale prices. The CMA's 2023 road fuel market study found that weaker competition in the sector was contributing to higher margins, and the 2026 transparency scheme is partly a response to this finding.

For drivers, this means it is especially important to compare prices when wholesale costs have recently fallen — the cheapest retailers will have passed the savings on, while others may still be charging the old, higher price.

Regional Price Differences

As a broad pattern, fuel tends to be cheapest in areas with high competition and good proximity to refineries — particularly parts of the North West, North East and Humberside. It tends to be most expensive in remote rural areas, central London, and at motorway services.

Northern Ireland often shows different pricing patterns due to its proximity to the Republic of Ireland (where duty rates differ) and its different retail landscape. The Scottish Highlands and Islands consistently have among the highest prices in the UK due to delivery costs and limited competition.

You can explore regional price differences on our England, Scotland, Wales and Northern Ireland fuel price pages.

The CMA Transparency Scheme: A Game-Changer

In February 2026, the CMA launched its open data fuel pricing scheme, requiring all major retailers to publish their prices to a central database. This is the most significant change to UK fuel retailing in years. For the first time, drivers can see accurate, up-to-date prices at thousands of forecourts without having to drive past them or rely on crowdsourced reports.

The scheme is expected to increase competitive pressure on retailers, particularly those that have been slow to pass on wholesale price reductions. When drivers can instantly see that a station two miles away is 6 pence cheaper, the expensive station loses custom. Tools like Cheapest Fuel Finder use this data to help you find the cheapest fuel wherever you are.

What Can You Do About It?

You cannot change fuel duty or VAT, and you cannot control wholesale oil prices. But you can control where you fill up, and that is where the savings are. Here is what works:

• Compare before you fill. Use our price comparison tool to check prices in your area.
• Default to supermarkets. They are almost always cheaper than branded alternatives.
• Avoid motorway services. Plan your fuel stops on longer journeys.
• Watch for the feather. When you see headlines about falling oil prices, compare forecourts — the quickest to cut prices are the ones worth visiting.

For more practical savings tips, read our guide to 15 ways to save money on fuel, or find the cheapest petrol stations in the UK.