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May 2017 fuel price update

£2 a tank cheaper to fill up at a supermarket

But a third wholesale petrol price surge in six months threatens

19 May 2017

Filling up with petrol at a supermarket averages more than £2 a tank cheaper than at a non-supermarket forecourt for the third month running. Supermarket savings of this magnitude happened only three times throughout 2016, May’s AA Fuel Price Report reveals. 

Across all retailers, with oil down $5 a barrel and the pound 3% stronger against the dollar, the UK’s average pump price of petrol has dropped by nearly 2.5 p/litre since mid April. Diesel in the UK is now 3 p/litre cheaper than a month ago.

But now there is the threat of a third price surge in six months after oil bounced back above $50 a barrel. Since Wednesday, wholesale petrol has gone up 2 p/litre and diesel has risen 1.5p. Whether that increase is sustained is the dark cloud that hangs over the pumps at the moment.

Fuel price reports

Pump price profile (average UK prices per litre mid May):
  • Petrol: 116.29p, down 2.39p since mid April (118.68p)
  • Diesel: 117.44p, down 3.02p since mid April (120.46p)
Savings over the past month:
  • Petrol: £1.31 a tank or £4.78 a month for a family with two petrol cars
  • Diesel: £2.42 for a Transit-size fuel tank 
Supermarket pump price war 

The most recent supermarket pump price war, which Morrisons started a fortnight ago, needed another round of price cuts a couple of days later, this time initiated by Asda, before average UK prices moved significantly. Both diesel and petrol dropped by almost a penny over the weekend, whereas the original price cut shaved half a penny off the average price. This week it has been possible to find supermarket petrol at below 112 p/litre in some cities.

Rural towns suffering

However, the £2-a-tank gap between what it costs on average to fill up at a supermarket as opposed to a non-supermarket retailer illustrates the generally longer time it takes for falls in wholesale prices to be reflected at the latter’s pumps. There are petrol stations that are close to supermarket prices in towns and cities and the occasional maverick outside, but rural towns with populations as big as 18,000 and no supermarket fuel have seen prices drop by only a penny. Petrol at 118.9 p/litre is common in these communities, often creating a £3-a-tank difference that makes a trip to a supermarket worth the expense when it fits in with another journey.

Grabbed a bumper opportunity

“Wholesale prices bobbing up and down 3 p/litre every couple of months are perfect conditions for supermarket pump price battles – providing the Big Four as a group want to play along. March through April into this month has provided them with a bumper opportunity and, for the most part, they have all grabbed it,” says Edmund King, the AA’s president. 

“To some extent, it is understandable that, with wholesale prices bouncing up and down each month, many non-supermarket retailers will look to follow a longer-term price trend. But that leaves them out of step with the cut-price rivals and, with UK inflation heading up, turning to supermarkets for cheap fuel offers some chance of balancing family budgets.

with UK inflation heading up, turning to supermarkets for cheap fuel offers some chance of balancing family budgets
Edmund King, AA president

 

We haven't seen the last of the wholesale price surges

“With the power struggle between OPEC and north American oil producers showing little sign of settling down, it is likely that we haven’t seen the last of the wholesale price surges this year. If the Government had implemented wholesale price transparency, which would warn drivers when pump prices are likely to rise or fall, families that rely on their cars to get to work, take the kids to school and for daily errands would be better able to take the peaks and troughs in their stride.”

National and regional variations

Across the UK, the North East is the cheapest for petrol and diesel with an average of 115.3p and 116.1 p/litre respectively. It is unusual to undercut prices in Northern Ireland but, being in the heartland of fuel’s most fiercely competitive supermarkets, the recent price war has left its mark.

However, there is no change among the most expensive areas, with the South East averaging 116.9 p/litre for petrol and 118.1p for diesel.

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