Diesel prices in the UK are expected to hit record levels over the weekend, as the fallout from the US-Israel war with Iran continues to drive up costs.
The numbers
The average price of a litre of diesel at the pump stands at 198.32p, according to the RAC — close to the all-time high of 199.09p recorded on 25 June 2022, after Russia's full-scale invasion of Ukraine.
Simon Williams, the RAC's head of policy, said the June 2022 high would "almost certainly be surpassed over the weekend as retailers continue to pass on the increases they're seeing when they buy new supply".
Over the past seven months the Iran war has severely disrupted the production and transportation of wholesale oil across the region, sending the price of fuels made from oil surging. Prices fell back when the US and Iran agreed a framework deal in June to end the fighting, then rose again as tensions resurfaced. The Times reported the same week that British diesel prices could hit record highs.
What it means in Bangladesh
A British pump price is not itself news in Dhaka. What it measures is: it is a live reading of the world diesel market, taken at a point where the number is published daily and honestly. Bangladesh buys from the same market.
The transmission is slower here and that is the thing to understand. UK retail prices move within days because the market is deregulated and competitive. Bangladeshi prices move when the government decides they move, which means the increase arrives later, in larger steps, and lands on either consumers or the budget depending on the decision taken.
That delay is often mistaken for insulation. It is not. The cost is incurred at the moment the cargo is bought, regardless of what the retail price says. If it is not passed on, it accumulates as a loss at the Bangladesh Petroleum Corporation and eventually as a subsidy claim on the budget, which competes with everything else the budget does.
Three practical implications. For transport operators and farmers, a world price this far above its recent range is a signal to expect a domestic adjustment rather than to assume the current price holds. For the boro season, which runs on diesel irrigation from December, the exposure is concentrated and the timing is bad. And for anyone reading the inflation numbers, diesel is the input that moves food prices with a lag, through the cost of moving every sack of rice and vegetables to market.
The policy response being discussed at source — cutting off exports to protect domestic drivers — is set out in the US diesel export ban on the table, and it would raise the world price further, not lower it.
