Will the ceasefire have any impact on UK fuel and food prices?
Will the Ceasefire Influence UK Fuel and Food Costs?
The two-week ceasefire has sparked immediate yet temporary relief in global markets, with stock exchanges rising and crude oil prices falling. However, the long-term effects on consumer spending remain uncertain, as analysts warn that irreversible damage may already be in motion. In the past month, oil, liquefied natural gas, and fertilizer shipments have faced blockades at the Strait of Hormuz, while infrastructure damage in the Gulf has slowed production. Even with peace agreements, experts predict it will take months to restore normal supply levels and stabilize prices.
“Much depends on the ceasefire’s stability, the free flow of oil through Hormuz, and the Gulf’s production recovery,” said Simon Williams, RAC’s policy head. He emphasized that sustained lower prices over weeks are necessary to reduce wholesale fuel costs significantly.
Jet fuel prices remain roughly double their pre-war levels, according to Willie Walsh of the International Air Transport Association (IATA). He noted that resuming traffic through the strait alone won’t immediately lower prices, as refining facilities have also been impacted. “Months are needed to reach supply levels that support stable pricing,” Walsh stated. Some airlines have already raised fares, while others have trimmed routes.
“It’s challenging to forecast how quickly pump prices will decrease,” added Rachel Winter from Killik & Co. “I’d expect at least a few weeks, maybe months, for noticeable changes.”
Fertilizer costs have surged due to the strait’s role in transporting a third of global supplies. This has increased the cost of food transportation in the UK and raised expenses for farmers relying on diesel for machinery. Crop growers using energy to heat greenhouses will also face price hikes when the energy price cap resets in July.
Dr Liliana Danila, chief economist at the Food and Drink Federation, stated that the ceasefire hasn’t resolved “long-term uncertainty.” She highlighted that Gulf supply chain recovery could take six to twelve months, meaning manufacturers will endure cost pressures for months, affecting oil, gas, fertilizers, packaging, and cleaning products.
Households under Ofgem’s energy price cap have so far avoided the wholesale price spike. The cap resets for three months in July, with more than half the calculation period already elapsed. Experts anticipate a major price increase, though government support based on income may arrive later in the year. Dr Craig Lowrey from Cornwall Insight noted that the ceasefire eases immediate gas market stress but doesn’t eliminate future challenges. “Unless prices drop well below pre-war levels, the March and early April hikes will still affect bills,” he explained.
Lars Jensen from the International Energy Agency… (the article ends here).