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Sir Keir Starmer’s cost of living tsar has called on the UK government to rethink its planned fuel duty increase in September, as rising pump prices in the wake of the Iran war add to pressure on household finances.
Lord Richard Walker, executive chair of retailer Iceland, on Friday said ministers should look at “extending . . . or enlarging” the current 5p-a-litre cut, which is due to expire later this year.
Walker, who as the prime minister’s “cost of living champion” since February is exploring measures to help households with their bills, pointed to a recent move by Australia to reduce fuel tax by about 14p a litre.
“I think, given where we are, we do need to be thinking and talking about extending it or enlarging it [the UK fuel duty freeze],” Walker told the BBC.
His comments came as UK motorists are set to face £2-a-litre diesel prices within days after wholesale prices surged to a four-year high, adding to cost of living pressures that have been reignited by the Middle East conflict.
Alan Gelder, an oil products expert at Wood Mackenzie, said diesel prices at the pump were expected to surpass £2 a litre within a week after European diesel futures reached the equivalent of $211 a barrel, almost double the price of crude oil.
The loss of supplies from the Middle East has driven up oil prices across the world but diesel has had some of the most rapid gains, with the world’s buyers jockeying for the remaining supplies.
Middle Eastern refiners have become more significant to European diesel supplies in recent years after restrictions were placed on purchases from Russia following its full-scale invasion of Ukraine in 2022.
“Every day that passes, the oil market gets tighter so prices continue to climb,” Gelder said. “Diesel prices could well go much higher.”
Already, UK motorists saw the highest monthly rise in prices for diesel and petrol on record in March, according to figures compiled by RAC.
The cost of unleaded petrol at the pump rose 20p a litre and more than 40p for diesel last month. Diesel is selling for an average of £1.85 a litre, according to RAC data.
“Fuel prices have never risen this fast in a single month,” said RAC head of policy Simon Williams. “The increases drivers have had to endure in March 2026 far exceed those seen in the early days of the war in Ukraine.”
The Iranian threat to shipping through the Strait of Hormuz continues to prevent most oil from the Gulf reaching global markets and stockpiles are being eroded as countries dip into commercial and strategic reserves.
The UK imports only about a tenth of its diesel directly from the Middle East, but about 40 per cent of the UK’s diesel comes from Dutch and Belgian refineries, which get a significant portion of their crude from the Middle East.
Starmer last month said he would keep “under review” the plan to end the fuel duty freeze, in place since 2011, and crack down on “price gouging” by unscrupulous petrol retailers taking advantage of fluctuating market prices.
The UK government has also privately sought to calm fears about potential supply shortages. But energy traders and fuel suppliers have warned that petrol stations and refineries could run down their stockpiles of diesel by mid-May if the conflict in Iran is not resolved.
Higher diesel prices feed through rapidly into inflation as most goods in the UK are transported by diesel-powered trucks.
While countries across Europe face similar pressures, the problem facing the UK was acute, said Benedict George, head of refined products at Argus Media, arguing that the country’s diesel stocks were lower than those of other European countries.
Additional reporting by Ashley Armstrong in London
