UK inflation accelerates as fuel costs rise, government clears Jackdaw gasfield

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UK inflation rises, Jackdaw gas

Highlights

UK consumer price inflation rose to 3.5% in September from 3.1% in August, exceeding expectations due to surging motor fuel prices.
Petrol prices surpassed £1.70 a litre and diesel exceeded £2 a litre as Brent crude climbed above $100 a barrel amid geopolitical tensions.
The UK government approved the Jackdaw gasfield, aiming for first gas delivery by end of month and launched a £2bn energy wealth fund for climate transition.

September price pressures and rate outlook

As reported by The Guardian, UK consumer price inflation reaches 3.5% in September, up from 3.1% in August and slightly above economists’ forecast of 3.4%. The Office for National Statistics says transport, particularly motor fuels, is the largest driver of the increase, while restaurants and hotels make the biggest downward contribution.

The motor fuel inflation rate is the highest since August 2022. Core CPI, which excludes energy, food, alcohol and tobacco, rises by 2.8% in the 12 months to September, compared with 2.6% in August.

Petrol prices climb above £1.70 a litre, while diesel passes £2 a litre this month. Oil and gas prices have surged since the end of February, when the U.S. and Israel launched their war on Iran, and disruption to fossil fuel traffic through the Strait of Hormuz pushes Brent crude well above $100 a barrel.

Jackdaw approval and energy security strategy

The UK government has approved the Jackdaw gasfield in the North Sea, in a move that is expected to draw criticism from environmental campaigners and some Labour MPs. Energy Secretary Miatta Fahnbulleh says the project will begin supplying gas to homes and businesses from the end of this month and will contribute to UK supply from this winter.

Fahnbulleh says the government will also create a new energy wealth fund with a £2bn downpayment to reinvest oil and gas revenues into the climate transition. She says the decision supports energy security with domestic gas, reduces reliance on imported higher-emission fuels and remains compatible with the government’s legally binding climate commitments and net zero goal for 2050.

The approval comes despite Labour’s 2024 election manifesto pledge to ban new North Sea drilling licences. Jackdaw and the separate Rosebank oilfield project are both seeking environmental approval under existing licences, and the Jackdaw decision had been expected last month before being delayed.

Our earlier article covered the sell-off in U.S. tech and AI-linked stocks as oil climbed to around $110 a barrel, heightening fears of renewed inflation. We noted that higher energy costs can complicate central-bank rate decisions and raise financing costs for companies, adding to broader market volatility.

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