February fuel price update

Diesel price nudges record while stronger pound softens wholesale price surge

17 February 2012

Diesel price nudges record while stronger pound softens wholesale price surge

Diesel price nudges record while stronger pound softens wholesale price surge

Average UK diesel prices have risen to 142.80p a litre, a fifth of a penny shy of the record set in May last year (143.04p), according to February’s AA Fuel Price Report.

Over the past month, petrol rose 1.46p a litre and now averages 135.00p a litre – still 2.43p off the record. Since the start of the year, when petrol averaged 132.25p a litre, the monthly fuel bill for a family with two petrol cars has risen £5.84.

Petrol prices would have been 1.5p higher had the pound’s value not strengthened from around $1.53 to $1.58 over the past month. Even so, the rise in NW Europe wholesale petrol from $900 a tonne at the end of November to over $1000 a tonne at the beginning of February is now overwhelming the stronger pound.

The UK’s rate of inflation may have fallen but that comes as cold comfort for consumers and businesses that depend on their vehicles and see pump prices nearing last year’s records

Edmund King, AA president

Over the past month, the average price of diesel has gone up 0.8p a litre, rising from 141.90 in mid January.

Comment

“The UK’s rate of inflation may have fallen but that comes as cold comfort for consumers and businesses that depend on their vehicles and see pump prices nearing last year’s records,” says Edmund King, the AA’s president.

In a period of stagnant wages, petrol costs 23p a litre more and diesel 29p a litre more than in February 2010, when fuel price rises picked up pace. A typical 50-litre petrol refill now costs £11.50 more and filling an 80-litre commercial van tank with diesel has risen £23.20.

In inflationary terms, that is a 20.5% rise in two years for petrol and a 25.6% increase for diesel over the same period.

The AA will be reminding the Chancellor before the March Budget that his 3p fuel duty increase ear-marked for 1 August should be scrapped if these high pump prices persist.

Local differences

Price differences between towns have grown to as much as 5p a litre for the cheapest petrol, in counties such as Nottinghamshire and Kent. In Europe, manipulative pump pricing has led to countries like Austria and Denmark extending the role of their domestic energy regulators to oversee road fuel pricing.

Europe

In Austria, all fuel stations are legally obliged to log their prices and any changes on an official database. At midday, the database is closed to view and fuel stations register a price during a short ‘window’. This stops retailers matching competitors with higher prices. Once the database is re-opened to view, retailers are only allowed to reduce prices during the day and must notify the database within 30 minutes of each change.

In Denmark, a list price is published the evening before, based on the movement of the wholesale price. The list price becomes the legal maximum which is registered on a national price database and comes into force at midday. Retailers are allowed to lower the price but have to notify the database of the change. The Danish system not only resets all prices daily to the same level but gives drivers the opportunity to spot a likely increase and buy at the previous day’s adjusted prices before the market is reset.

In both countries, the consumer is empowered to report any violations by taking a picture on a mobile phone and sending it to the enforcing authority.

These countries don’t benefit from the UK’s pioneering pump price transparency, created from the logging of fuel card transactions at petrol stations and made available online and via mobile phone.

"The additional benefit of a system that shakes up prices at midday and could reduce the price jams blighting so many UK towns could become attractive,” says Edmund King.

Regulator

More important is the growing involvement of a regulator in the road fuel market. Although the AA’s preference would be for greater market transparency, particularly comparing movements in the wholesale price with those at the pump, a regulator acting as an honest broker between fuel suppliers, retailers and consumers may be a role worth exploring. With independent retailers often complaining about how much they are charged for fuel and the pricing of other groups in the market, a regulator offers a potential solution.

Regional

A regional comparison of UK fuel prices shows that the highest average price for petrol is being charged in Northern Ireland at 135.9p a litre, 1.7p dearer than the lowest, in the North (134.2p). Diesel is also most expensive in Northern Ireland, averaging 143.5p a litre, compared to 142.3p in the cheapest regions, the North and Yorkshire and Humberside.

Drivers on islands around Scotland and the Isles of Scilly are due to start benefiting from a 5p fuel duty rebate from 1 March. Community pumps, a growing source of fuel in remote areas of Scotland, are already passing on the saving with two in Shetland cutting prices last week. The lack of transparency between wholesale and pump prices still means that it will be difficult to gauge how much of the rebate is passed on by suppliers to retailers or retailers to drivers.

(17 February 2012)

Fuel price data supplied by Experian Catalist