The price shown on a UK forecourt pump is made up of four main parts: the wholesale cost of the fuel itself, fuel duty, VAT, and the retailer's own margin. None of these move together, which is why prices can vary noticeably between two forecourts a few miles apart, and why the price you pay can change even when the wholesale oil market hasn't moved much.
Wholesale cost
This is the cost of the refined petrol or diesel itself, set by international wholesale markets and driven mainly by the global price of crude oil, refining costs, and the value of the pound against the US dollar (oil is priced in dollars, so a weaker pound makes fuel more expensive in the UK even if the dollar oil price hasn't changed). Wholesale prices can move daily, but retail prices at the pump typically lag behind by a week or two as retailers work through existing stock bought at the previous price.
Fuel duty
Fuel duty is a fixed amount of tax charged per litre, set by the UK government and applied equally to petrol and diesel. It doesn't change with the wholesale oil price — it only changes when the government changes it in a Budget. As of mid-2026, the rate is 52.95p per litre, which includes a temporary 5p-per-litre cut that has been repeatedly extended since 2022 and is due to be phased out in stages later in 2026 and into 2027. Because this is a genuine tax policy that changes with government decisions, always check GOV.UK for the current rate rather than treating any figure here as fixed.
VAT
On top of the wholesale cost and fuel duty combined, the standard rate of UK VAT (20%) is charged on the whole amount — meaning VAT is effectively charged on the fuel duty as well as the fuel itself, a detail motoring groups have long pointed out as a "tax on a tax." Between fuel duty and VAT, well over half of what you pay at the pump for petrol or diesel is tax, even before the retailer's own costs and margin are added.
Retailer margin and location
What's left after wholesale cost, duty, and VAT is the retailer's margin, covering running the forecourt and their profit. This is the part that varies most between locations: supermarket forecourts typically operate on thinner margins to drive footfall into their stores, motorway service stations charge more to cover far higher rent and lower customer volumes, and independent rural forecourts often sit in between, balancing lower footfall against higher delivery costs. This is also why searching by postcode, as you can on the Local Petrol Prices homepage, often turns up a noticeably cheaper option just a short drive from the first station you'd normally use.