AA Fuel Price Report

Price rises hit plateau after overtaking 2006 levels

20 June 2007

Petrol price rises have levelled off and, for now, the cost of a litre is averaging 96.98 pence across the UK - more than a penny higher than at the same time last year, the AA's fuel price report reveals. Diesel, which started the year five pence more expensive than petrol, now averages at 97.38 pence per litre and matches the price of petrol at many filling stations.

Whereas the UK price of petrol fell nearly a penny from mid-May to mid June last year, continuing gasoline stock shortfalls in the USA have maintained high petrol demand this year and kept prices up. However, supply has improved since the beginning of this June and falling petrol prices in the US have been reflected in the UK with price increases grinding to a halt over the past fortnight.

Even so, the cost of petrol is 1.5 pence shy of the record high (98.54 ppl) in August 2006, a gap that would have been three pence had the Chancellor not added 1.47 pence in fuel duty and VAT to the price of a litre in December's Pre-Budget Report.

A litre of petrol, now more than seven pence per litre more expensive than at the time of the Budget in March (89.77 ppl), generates an additional penny per litre in VAT receipts for the Treasury. This brings in at least another £687,760 per day from petrol sales alone.

Although much of the petrol price rise has been driven by US shortfalls, oil costing more than $70 a barrel threatens to keep up the pressure on fuel prices. In July 2006, when petrol averaged 97.5 pence per litre, crude oil cost around $75 a barrel. This rose to over $78 in August when the price of petrol reached its all-time high – without the duty increase to help it.

"Volatile petrol prices pressured the Chancellor to freeze fuel duty for three years until December 2006. Now with prices continuing to go up when they fell last year, the Government may need to review its proposed two pence-per-litre duty increase in October," says Paul Watters, head of AA Public Affairs.

"For consumers, the typical two-car owning family is paying £15.84 per month more for its petrol than it was at the time of the Budget in March. As usual, most of them will absorb the extra cost into their family budget, although low-paid and rural drivers suffer in particular. However, that money is siphoned away from much of the local economy and tourism suffers from visitors having less to spend when they arrive."

Competition among supermarkets has become tighter with the difference in price between the most and least expensive closing to less than a penny. However, although the gap between supermarket and non-supermarket petrol has grown slightly, Esso, Jet and Shell are within a penny of the average price charged by Tesco, the most expensive of the supermarkets.

Across the UK, the cheapest areas for petrol last month have seen the biggest rises with the North and London prices going up on average 1.3 pence per litre. Wales and Northern Ireland remain the most expensive regions for petrol, with the North West re-establishing its traditional position as the cheapest place to fill up.

AA monthly fuel price reports

Notes to editors

For a detailed breakdown of average fuel prices by region or by brand please contact AA Public Affairs on 01256 493493


20 June 2007