July fuel price update

Yo-yo prices offer little respite for drivers

20 July 2011

Over the past month (to mid-July) UK average petrol prices dropped nearly 2.5p before surging back almost 2p in the past fortnight.

According to the latest AA Fuel Price Report, mid-July average UK pump prices saw petrol bounce back to 135.62p a litre, compared to 136.07 a month ago. Diesel has almost returned to where it was a month ago at 139.68, compared to 139.77 in mid June. In between, the average price of petrol fell as low as 133.68 and diesel down to 137.59 (3 July).

Hope that releasing strategic oil reserves into the market would stall further price rises was quickly dashed when speculators picked holes in the move and predicted that Brent would reach $120 in six months and $130 in a year, sending oil prices up $5 in one day.

A weakened pound made fuel even more expensive and added to driver and business woes.

A quick but very welcome supermarket price war knocked the UK's petrol cost down 1.4p and diesel down 1.3p over the weekend of 25-26 June, before further fuel savings were tied to instore or online purchases. The supermarkets' ability to hold prices down longer is currently giving them a competitive advantage, with only rivals Jet, Shell and Total on average still selling diesel at a lower price than a month ago.

The bottom line remains that petrol is 18.52p a litre more expensive than a year ago (117.10p) while diesel is 20.16p dearer than in mid-July 2010 (119.52p).

Going into the summer holiday period this means that each day, £11.3 million more is siphoned from high street, leisure and other consumer spending into fuel sales compared to a year ago.

Further bad news for drivers came with Tuesday's Royal Assent for the Finance Act, which will raise fuel duty from 57.95p a litre to 60.97p on 1 January 2012. With VAT, that will add 3.52p to the pump price of petrol and diesel.

Regions

The impact of soaring fuel prices is now clear with the one billion-litre fall in petrol sales during the first quarter of 2011, compared to the pre-credit-crunch first quarter of 2008. Drivers in the South West are to experience this first hand as one of the cheapest non-supermarket fuel suppliers pulls out of the region because of falling sales volumes. Earlier this month, independent fuel retailers discussed going it alone on fuel supply and setting up their own brand.

Elsewhere regionally, only Northern Ireland, Scotland, the North, East Anglia and the South East have average diesel prices that are below where they were a month ago. Despite the national average petrol price falling 0.45p over the past month, Londoners are on average paying just 0.1p a litre less than in mid June.

The most expensive region for petrol is Northern Ireland, averaging 136.4p a litre, while the cheapest is Yorkshire and Humberside at 134.8p. Scotland sells the dearest diesel, averaging 140.3p a litre, while Yorkshire and Humberside sells the cheapest with an average price that is back to where it was a month ago at 138.9.

Only a quarter (24%) of them had their car fixed at the roadside so most were simply recovered to a garage for repair at additional cost. On top of the extra financial pain, they faced the extra time, stress and inconvenience of trying to find a garage that could help when they may have been in a vulnerable or unfamiliar location or the dark of night.

New initiatives

High fuel prices and their impact on drivers, rural and public transport have encouraged new initiatives to keep communities mobile. These include:

  • Volunteers driving buses along rural Isle of Wight routes to keep more remote communities connected.
  • Shell's Smarter Cab Drivers challenge already helping to cut cabbies' fuel costs by up to 12% by following AA eco-driving advice, reversing a trend that has seen one London cabbie's fuel costs go up £10 a day, one in Birmingham's rise £40 a month and up to £15 a month more for another taxi driver in Nottingham.
  • Prefabricated fuel stations for rural communities that have lost access to local fuel supply, allowing income to be ploughed back into the community.