April fuel price update

Bank holiday driving costs £2 more per 100 miles

21 April 2011

Record petrol and diesel prices will squeeze an extra £2 every 100 miles out of bank holiday drivers.

According to the AA Fuel Price Report for April, compared with last Easter 18% of AA members who say they will make a trip of at least 100 miles over the next fortnight will be paying 14.92p/litre more for petrol and 20.09p/litre for diesel.

Someone seems to be making substantially more money from lower raw material costs and it is time the drains were pulled up on the fuel market

Edmund King, AA President

Duty cut swamped in a week

Average UK pump prices keep setting new records, now at 135.79p/litre for petrol and 141.99 for diesel, respectively up 2.91p and 3.01p-a-litre in the last month (since mid-March).

This is despite the Government's 1p cut in fuel duty, the saving from which lasted just over a week before market pressures swamped the attempt to relieve cash-strapped drivers.

Last week, wholesale petrol in Europe hit record levels despite oil being at least $25 a barrel cheaper than at the previous wholesale price peak in July 2008. Then, the price of oil peaked at $147 a barrel, compared to prices that are now 15-20% lower.

Transparency

With consumer and business finances being ravaged by soaring fuel prices, the AA believes the need for market transparency is now overwhelming. This view is supported by an analysis of oil trading market behaviour 2003-2010, published this month by the Oxford Institute for Energy Studies and co-written by Adair Turner, chairman of the FSA*.

£30/month more

Compared to a year ago, a typical 50-litre tank refill now costs £7.46 more for petrol and £10.05 more for diesel. A two-car family is spending £31.68 a month more on petrol (£288.34 v £256.66).

Voucher wars

Average supermarket fuel prices across the UK remain tightly competitive and a fuel voucher war has broken out, with the Co-op offering 5p off a litre from a £30 instore spend and Morrisons 6p off from a £40 instore spend.

This compares with the more established 5p-a-litre saving from a £50 spend offered frequently by Sainsbury and Tesco.

Asda continues to expand its fuel station network, stimulating price drops in new areas with its low-price policy.

Comment

"The pain of soaring fuel prices that have plagued UK families through the winter is now being felt by the summer tourism and leisure industry. With almost every car heading into the West Country, Wales, Scotland and other domestic holiday destinations losing at least £2 in potential tourist spending to the fuel pump, the impact of austerity on business is ratcheted up another notch," says Edmund King, the AA's president.

"The AA doesn't normally get excited by supermarket fuel vouchers – the £50 spend to get a 5p/litre fuel saving doesn't work well for single people, pensioners and lower-income consumers. However, the timing of the lower cost and higher return Co-op and Morrisons vouchers could offset the higher fuel cost of a trip to the seaside for someone who needs to stock up over Easter. However, drivers still need to compare pump prices and the cost of driving to cheaper fuel outlets to find the best deals."

King adds: "Our main beef this month is with pump and wholesale petrol prices at record levels yet oil substantially cheaper than in 2008 when wholesale petrol last peaked. With oil and wholesale fuel both traded in dollars, exchange rates are not a factor. Someone seems to be making substantially more money from lower raw material costs and it is time the drains were pulled up on the fuel market."

Since 2005, the AA has called for transparency in the fuel market, similar to that in the USA, Australia and South East Asia. We suspect that, following the short-lived impact of the 1p cut in fuel duty, the Government may be irritated enough to see merit in monitoring.

For our part, the AA is consulting with other European motoring clubs with a view to approaching the EU competition commissioner.

* Page 56, The Oil Trading Markets, 2003 – 2010: Analysis of market behaviour and possible policy responses. Published April 2011, The Oxford Institute for Energy Studies.

"...enhancing the quality and scope of fundamental data would at least provide the market with better information on which it can base price discovery. This could help contribute to less volatile oil prices by reducing the range of possible interpretations of underlying fundamental data. Whilst improved transparency of the financial market is important, greater transparency of physical market fundamentals would be of greatest significance."