UpTrajectory Review

The BBC reports that diesel has hit £2 per litre at UK pumps as global oil prices climb. That is a psychologically and economically significant threshold. For small-business operators, especially those running delivery fleets, trades vans, or machinery, fuel is often the second-largest variable cost after wages. When diesel crosses £2, it stops being a background expense and starts eating directly into already thin margins. The broader context is a global oil market under pressure from geopolitical instability, production decisions by OPEC+, and renewed demand. The UK is particularly exposed because it imports most of its fuel and levies some of the highest fuel duties in Europe. The RAC and AA have warned that prices could rise further if crude oil continues its upward trend.

For a small-business owner, this is not an abstract macroeconomic story. It is a cash-flow problem arriving in real time. A plumber covering 1,000 miles a week in a van doing 35 mpg is now spending roughly £260 a week on diesel, up from around £200 just a few months ago. That extra £60 a week is £3,000 a year, enough to wipe out the profit margin on several jobs. Hauliers and couriers face an even steeper hit. The knock-on effect is that businesses either absorb the cost, squeezing their margins, or pass it on to customers through fuel surcharges, which risks losing work in a cost-of-living-conscious market. Neither option is attractive.

What is genuinely new here is the speed of the increase. Diesel has been creeping up for weeks, but crossing the £2 threshold marks a step-change in how businesses and consumers behave. The RAC has noted that diesel is now at its highest price since records began in a nominal sense, and the gap between petrol and diesel has widened again, which is unusual given that diesel is cheaper to produce. We are somewhat skeptical of the government's response so far. The 5p fuel duty cut introduced in 2022 was always temporary, and there is little sign of it being extended or made permanent. The Treasury benefits significantly from higher fuel prices through VAT, so there is a perverse incentive for the government to let prices rise.

The second-order effects are significant and unevenly distributed. Rural businesses and those serving dispersed customer bases are hit hardest because they have no alternative to road transport. Urban businesses can at least consider switching to electric vans, though the upfront cost remains prohibitive for many. Consumers will feel this too, not just at the pump but in the price of groceries, building materials, and anything delivered by road. Inflation, which has been falling, could tick back up if fuel costs remain elevated. That, in turn, affects interest rate expectations and the cost of business borrowing. The Bank of England has been cautious about cutting rates, and a fuel-driven inflation spike would make it even more cautious.

What to watch next is whether the government responds with a more substantive intervention, such as extending the fuel duty cut or introducing a targeted support scheme for hauliers. The other thing to monitor is the crude oil price itself. If Brent crude stabilises below $90 a barrel, pump prices should ease within a few weeks. If it pushes above $100, £2 diesel will look cheap. In the meantime, small-business operators should review their fuel purchasing strategy now. Consider fuel cards that offer wholesale-linked pricing, negotiate delivery surcharges with key customers before margins are eroded further, and if you are due to replace a vehicle, run the numbers on electric or hybrid alternatives with total cost of ownership, not just purchase price, in mind. Waiting for prices to fall on their own is not a strategy.

Takeaway: Review fuel contracts and delivery pricing now, because diesel above £2 a litre is eroding small-business margins faster than most owners have priced in.