Petrol prices up 13% as energy shock threatens hit to consumer spending
Robyn Duffy, Consumer Markets Senior Analyst at RSM UK: “With the average price of petrol up by 13% from 131.46p per litre in mid-February to 148.78p per litre on 30 March, consumers have already suffered a direct hit from the Iran conflict and could face further inflationary effects if it continues.
“Looking back to the last energy crisis, wholesale energy prices peaked in May 2022, but consumer confidence did not reach its lowest point until September – a lag of around four months. This highlights how the impact of the energy shock on consumer behaviour may not be immediate but instead could feed through gradually as higher energy and input costs are passed on into prices and household bills.
“Even before the Iran crisis, real household disposable income (RHDI) was expected to only grow modestly this year at roughly 0.5%. This was based on inflation rising back over 2.5%, while the higher tax burden and weaker labour market would weigh on nominal income growth.
“Even in a best-case scenario where energy prices fall back soon, real household incomes would still stagnate this year. However, in a downside scenario where oil rises to $150 per barrel and gas reaches 300p per therm – and remains elevated throughout the year – incomes could fall by around 2% in 2026. This is a similar level to how much RHDI fell by in 2022, despite government support.
“Similarly to the last energy crisis, households are sitting on unusually high level of savings, which may help to provide a buffer and smooth the impact of higher costs in the near term. While this should help to limit the immediate hit to consumption, households tend to prioritise rebuilding savings in the aftermath of a shock, which we saw in 2022, so spending may remain subdued for a prolonged period.
“The UK economy already entered 2026 on a softer footing, with weaker growth and rising concern around the labour market weighing on sentiment. Households are also coming off the back of a sustained period of shocks, leaving confidence more fragile and sensitive to further disruption. As consumers pull back on spending, combined with higher energy bills, this will come as a double whammy for consumer-facing businesses.”