Crude oil is extracted
Petrol and diesel are made from crude oil. The oil is typically extracted by drilling into the earth’s surface where reserves have been found, either on land (onshore) or on the sea bed (offshore).
Crude oil is bought and sold
Crude oil is transported by ship or pipeline from where it is produced to refineries for processing. It is bought and sold on the global market, where it is traded in US dollars. The oil prices fluctuates depending on supply and demand.
Refineries turn crude oil into petrol and diesel
Refineries process crude oil by heating it. This helps to separate the oil into different products, including petrol and diesel. They also make kerosene for aeroplanes and bitumen for roads and raw materials for chemicals which are used in millions of everyday products.
Petrol and diesel traded on wholesale markets
Refineries sell their products on wholesale markets, where prices also vary according to global supply and demand. Because oil products are traded in US dollars on the global market, the UK prices also fluctuate with currency exchange rates.
Petrol and diesel transported to terminals ready for distribution.
Fuel retailers, including Shell, buy petrol and diesel and take it to terminals ready for distribution to their retail sites. Service station staff costs, rent, maintenance and distribution expenses all add to the cost of supplying fuel to customers. Typically we make around 2% profit, or a few pence per litre, on our UK fuel sales.
Fuel duty and VAT added
Around two-thirds of the retail price of fuel goes to the government as Value Added Tax and fuel duty. Duty is fixed at 57.95 pence per litre, regardless of petrol and diesel prices. These taxes make UK petrol and diesel amongst the most expensive in Europe.
