Taxi drivers shoulder rising fuel costs potentially totalling £1,000 as tariff system lags behind pump price spikes
- Perry Richardson
- Mar 17
- 3 min read
Taxi and private hire drivers across the UK are among the transport workers most exposed to sudden fuel price increases because regulated fares are typically set months in advance and cannot respond quickly to market shocks.
The issue has come into focus again following sharp rises in pump prices linked to geopolitical tensions in the Gulf region. The Strait of Hormuz, one of the world’s most critical oil transit routes, handles around 20% of global oil shipments. Recent threats from Iran against vessels using the strait, alongside military strikes by the United States and Israel on Iran from 28 February, have pushed oil prices above $100 a barrel and triggered rapid increases in fuel costs.
According to RAC Fuel Watch data, petrol prices have reached their highest level in 18 months. The average price of unleaded has risen by around 8p per litre to 140.6p since the conflict escalated, while diesel has jumped by nearly 17p to 159.2p per litre.
RAC Head of Policy Simon Williams said households and motorists are already feeling the impact: “Households, especially those that depend on the car, are under increasing financial pressure as a result of the conflict in the Gulf. The average price of a litre of unleaded has now risen by 6%, or nearly 8p, to 140.6p since the start of the conflict and is it at its highest in 18 months. Diesel has rocketed by 12% or almost 17p to 159.2p a litre, a price we’ve not seen since November 2023.”
He added: “The fact the cost of a barrel of oil has exceeded $100 and wholesale fuel prices continue to rise is concerning, but it’s the speed at which drivers are feeling the effects which is under the spotlight now. Drivers deserve and should expect to be treated fairly when it comes to filling up, especially with pump prices still heading north. We therefore hope the meeting between the fuel industry and government on this important issue is productive.”
Global oil disruption and rising pump prices are increasing operating costs for taxi and private hire drivers who cannot immediately pass on the expense due to fixed fare tariffs.
For taxi drivers, the financial impact can be significantly greater than for private motorists due to the high mileage accumulated each year. A full-time driver can typically cover between 30,000 and 40,000 miles annually while working shifts across a city.
Using a typical diesel taxi consumption rate of around 30 miles per gallon, a driver travelling 30,000 miles a year would use roughly 4,545 litres of fuel. At 40,000 miles, fuel usage rises to approximately 6,060 litres annually.
With diesel prices increasing by around 17p per litre in recent weeks, that equates to an additional yearly cost of roughly £773 for a driver covering 30,000 miles and around £1,030 for someone travelling 40,000 miles. If elevated pump prices persist, the increase is absorbed entirely by drivers rather than passengers.
The reason lies in how taxi tariffs are regulated. In most cities and regions across the UK, fares for licensed taxis are determined through a structured tariff review process conducted by the licensing authority. The review uses a cost index that reflects retrospective industry expenses such as fuel, insurance, vehicle costs and maintenance.
However, the index is calculated and submitted well before a tariff change is implemented. This means fare increases are effectively based on historic operating costs rather than real-time changes in the market.
London provides a clear example. A new taxi tariff adjustment has already been approved to take effect in April 2026. The calculation behind that change was submitted in 2025 and reflects operating costs from the previous assessment period rather than the latest fuel price surge.
As a result, any rapid rise in pump prices between tariff reviews must be absorbed by drivers until the next formal review takes place, which can often be up to a year away.
This structure leaves drivers exposed during periods of volatility in energy markets. While passengers benefit from stable and predictable fares, drivers effectively carry the financial risk when fuel prices spike unexpectedly.
For high mileage drivers working full time, even short term increases in fuel prices can therefore translate into hundreds or thousands of pounds in additional operating costs before fare structures catch up.
