UK Inflation Reaches Five-Month High of 3.1% as Petrol and Diesel Prices Surge

The UK’s annual inflation rate rose to 3.1% in August, up from 2.9% in July, marking its highest level in five months.

The UK’s annual inflation rate rose to 3.1% in August, up from 2.9% in July, marking its highest level in five months.

According to data released by the Office for National Statistics (ONS), the increase was largely driven by a 23% rise in motor fuel prices compared with the same month last year.

Average petrol prices rose by 9.1 pence to 161.3p per litre, while diesel prices increased by 14.2p to 181.8p per litre. The increases were largely attributed to supply disruptions linked to the conflict in the Middle East.

Core CPI, which excludes volatile components such as energy and food, remained unchanged at 2.6% for the fourth consecutive month, suggesting that underlying domestic price pressures remain relatively contained.

The cost of filling up a vehicle surged in August as continuing tensions in the Middle East disrupted global oil supplies. Petrol prices reached their highest level in nearly four years, according to the ONS, while diesel prices also climbed sharply.

Oil prices rose above $91 a barrel as the conflict involving the US, Israel and Iran continued. Motor fuel prices were 23% higher than in August last year, compared with oil prices of around $73 a barrel before hostilities began earlier this year.

Average petrol prices continued to climb between July and August, rising by 9.1p to 161.3p per litre.

“This is the highest price recorded since November 2022,” the ONS said. At that time, Russia’s full-scale invasion of Ukraine had contributed to a sharp increase in global energy costs.

The rise in inflation above the Bank of England’s 2% target puts renewed pressure on households already facing elevated living costs.

Markets expect the central bank to hold interest rates at 3.75% as policymakers weigh signs of cooling in the domestic labour market against the impact of higher energy prices.

Paul Dales, chief UK economist, said: “Everyone knows that bigger rises in inflation are on their way.”

Grant Fitzner, chief economist at the ONS, said: “Rising crude oil and petrol prices increased both the annual cost of raw materials and the price of goods leaving factories respectively.”

Dales estimates that a combination of higher oil and gas prices, along with the eventual “first-round” effect of businesses passing on some of their higher energy costs, could push inflation to a peak of 4.2% in January.