August fuel price update

Wholesale petrol down 3p, pump prices down less than 1p

19 August 2011

The need for transparency in the market is now beyond question

Average UK petrol pump prices have fallen less than a penny in the past week despite falls in wholesale prices equivalent to at least 3p a litre, the latest AA Fuel Price Report reveals. With many drivers finding fuel costs increasingly unaffordable, the need for transparency in the market is now beyond question.

Petrol prices started to fall from a high of 136.58p a litre on 8 August to 135.71p on Monday, down just 0.87p. Two NW Europe wholesale petrol price indicators, published in national newspapers, show a fall of at least 6% in the first week of August, taking into account the $/£ exchange rate. With the product cost of UK petrol at 48p – 50p a litre, average UK petrol prices should have fallen at least 3p a litre.

There is clearly a need for price transparency covering oil, wholesale and retail markets, taking into account the exchange rate

Paul Watters, AA head of public affairs

Overall, between mid July and mid August, the average UK petrol price has risen from 135.62p a litre to 135.71, while diesel has risen from 139.68 to 139.89.

Compared to a year ago, petrol is now 19.22p a litre more expensive (135.71p v 116.49p) while diesel costs 20.91p more (139.89p v 118.98p). A typical 50-litre petrol refill now costs £9.61 more, adding £40.81 to the monthly petrol spend of a two-car family. Filling a commercial van’s 80-litre tank with diesel now costs £16.73 more than 12 months ago.

Although, at the end of July, one of the major supermarkets was being undercut on average by up to 3p on a litre of petrol by non-supermarket rivals, a flurry of price-cutting in the past 10 days has re-established a more typical pattern of cheaper supermarket fuel. But, even last week, it was possible to find independent retailers undercutting supermarkets in market towns in the South and rural West Midlands.

On Monday, Morrisons and Asda sold the cheapest petrol and diesel in the UK, undercutting rival supermarkets by as much as 2p/litre.

Comment

"Supermarkets announced that they would be cutting pump prices this week and, hopefully, the drop in wholesale costs will be more properly reflected at the pumps. However, there is clearly a need for price transparency covering oil, wholesale and retail markets, taking into account the exchange rate. This would allow drivers to see when they're getting a fair price at the pump and protect fuel suppliers and retailers from accusations of profiteering," says Paul Watters, head of AA Public Affairs.

"Choosing when and how to pass on lower fuel costs to the customer, whether as straightforward pump price cuts or money-off vouchers tied to spending in store, carries risks. Many independent retailers seized their chance over the past fortnight to undercut two of the major supermarkets and, with a six-mile or more round-trip to a superstore costing a litre of petrol, cash-strapped consumers may have looked closer to home for their fuel and top-up shopping."

(19 August 2011)