8NOV

OBR's Budget forecast assumes $82 oil

3 min read

19:56UTC

Britain's fiscal watchdog built John Healey's Budget on oil averaging $82 a barrel across 2026 and 2027. On Budget day, 28 October, Brent spot closed at $119.20.

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ConflictAssessed

Key takeaway

Britain's Budget assumed $82 oil while Brent spot traded far higher on Budget day.

The Office for Budget Responsibility (OBR), Britain's independent fiscal watchdog, assumed oil will average $82 a barrel across 2026 and 2027 in the forecast it published alongside Chancellor John Healey's Budget on Wednesday 28 October⁠¹. Brent spot closed at $119.20 that day, the EIA series shows⁠². The OBR took market prices from the ten working days to 19 August, and concedes that futures later climbed "close to the top end" of its range. In March it had assumed $63. Britain was among the G7 states that agreed on 2 October to release up to 100 million barrels of crude and diesel through the International Energy Agency.

Even at $82 the OBR expects inflation, measured by the consumer prices index (CPI), to peak close to 4% in early 2027, with growth of about 1.25% this year and 1% next, half a point below its March view. Its higher-for-longer energy scenario adds up to £17bn to borrowing in 2027-28.

The document blames "the conflict in the Middle East" for dearer wholesale energy and never names Iran. One caution on the gap: the $82 is an average across calendar 2026 and 2027, so a single day's spot price overstates the miss.

Deep Analysis

In plain English

The Office for Budget Responsibility is Britain's official fiscal watchdog. Each time the government sets out a budget, the OBR forecasts how the economy and public finances will go. To do that it must assume what oil will cost. In the forecast published on 28 October it assumed an average of $82 a barrel across 2026 and 2027. On that day the actual price of Brent Crude was $119.20. If oil stays far above the assumption, inflation and government borrowing could end up higher than the forecast says. The OBR's own worse case adds up to £17bn to borrowing in 2027-28.

Deep Analysis

Root Causes

The OBR's convention is to take energy prices from futures markets over a short window, then hold them fixed while the forecast is built. In a fast-moving war that window can be months out of date by publication: here it closed on 19 August, ten weeks before the Budget.

The March forecast's $63 assumption predated the worst of the Hormuz disruption, so the October revision to $82 still caught only part of the move. The OBR also raised its gas assumption to 117p a therm from 69p, with a peak near 150p at the end of 2026.

What could happen next?

Risk
If oil stays well above $82, the Chancellor faces a choice between more borrowing and new fiscal measures before the next forecast.
Meaning
The forecast never names Iran, attributing dearer energy to 'the conflict in the Middle East'.

Source Landscape

This story draws on neutral-leaning sources

Primary parallel: Kwasi Kwarteng's mini-budget of 23 September 2022 came without an OBR forecast during an energy price shock, and gilt yields rose so fast that the Bank of England intervened on 28 September 2022. Markets punished a fiscal plan they did not trust to match the energy outlook.

Counter-parallel: The OBR's November 2022 forecast assumed very high wholesale gas prices. Those prices fell through the winter of 2022-23, and the March 2023 forecast showed a better fiscal position partly as a result, so a stale energy assumption can err on the cautious side as well.

Brent spot closed at $119.20 on 28 October, the day the forecast was published, about 45% above the OBR's assumed average. The OBR puts pre-measures borrowing £18bn higher than in March and expects growth of about 1.25% in 2026 and 1% in 2027.

Energy prices feed the public finances through inflation-linked spending, debt interest on index-linked gilts and weaker growth. That is why the OBR's alternative scenario adds up to £17bn in 2027-28 rather than a small adjustment.

Consensus view: The OBR itself flags the weakness of its oil path. It used market prices for the ten working days to 19 August, and its October Economic and Fiscal Outlook says futures had risen "close to the top end" of its range by the time the forecast was finalised (para 2.8).

Counter-view: The OBR's $82 is the average across calendar 2026 and 2027, so the forecast turns on two years of prices, not any single day. If the 2 November fall in Brent held through 2027, part of the gap with the assumption would close.

Key tension: Whether the Chancellor's borrowing plans should be judged against the OBR's central case or against its higher-for-longer energy scenario, which adds up to £17bn to borrowing in 2027-28.

Sources:US Energy Information Administration·Office for Budget Responsibility

Mentions:Office for Budget Responsibility →John Healey →United Kingdom →Brent Crude →Middle East →Bank of England →Iran →International Energy Agency →England →

First Reported In

Update #184 · Iran offers talks, blacklists 114 more ships

US Energy Information Administration· 8 Nov 2026

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Written with AI from Lowdown's published reporting. Not individually reviewed by an editor. Editorial standards.