June fuel price update

Pump prices slump after Government pressure

13 June 2012

UK petrol prices have for the second month running fallen by more than 4p a litre

UK petrol prices have for the second month running fallen by more than 4p a litre

UK petrol prices have for the second month running fallen by more than 4p a litre – a reduction not seen since the price collapse of late 2008. However, AA Fuel Price Report research shows that, in late April, diesel car owners could have enjoyed pump prices much closer to petrol’s for the first time in two years.

The AA believes that the Transport Secretary’s calls for fuel price transparency, after an intensive AA campaign, may have helped contribute to a more rapid fall in price. However, the AA warns that there could be a sting in the tail as fuel duty is due to increase again by 3p litre on August 1st.

This month’s AA Fuel Price Report shows that, since mid-May, average UK petrol prices have fallen 4.63p a litre, from 138.40 to 133.77. This is on top of the 4.08p-a-litre fall the previous month and is the biggest monthly drop since the petrol price dived 5.4p a litre between mid-November and mid-December 2008.

Short of where it should be

Even so, the overall 8.71p-a-litre reduction in the pump price of petrol since the 142.48p record on 16 April is still short of where it should be. Even the fuel retailers’ association admitted a fortnight ago that “RMI Petrol’s Big Oil wholesale price assessment system shows that petrol has fallen by 8.436ppl from the end of March to present day”. With VAT, that’s 10.1p off the pump price.

Possible further price cuts

Under intense Government pressure to make pump prices transparent, the fuel industry will have to prove in the future that UK drivers are paying a fair price for fuel. The NW Europe petrol wholesale price, which fell $200 a tonne in April, has dropped a further $50 this month. The new fall was initially offset by a fall in the value of the pound but stronger sterling this week offers the possibility of further petrol price cuts.

Diesel doubts

Doubts have emerged over the price of diesel after EU data now shows that neighbouring European countries enjoyed pre-tax diesel prices at or below petrol’s in April while the UK’s diesel remained at least 4p a litre more expensive. This again highlights the need for transparency in fuel pricing across the UK.

In the past month, the average pump price of diesel has fallen 4.99p a litre, from 144.30p in mid May to 139.31 now. However, EU wholesale price data shows that the petrol price surge in March and April was so great that it closed the pre-tax pump price gap with diesel in Belgium, Germany, Spain, France and Holland, but not in the UK. A tonne of diesel contains 11% fewer litres of fuel than a tonne of petrol, pushing up the cost per litre. However, the cost of petrol across NW Europe rose €100 a tonne or 12.5% higher than diesel’s €800-a-tonne cost in March and early April to put petrol’s pump price before tax on a par with or below that for diesel.

This meant that, in Belgium, the petrol pump price before tax was up to 3.75% lower than diesel’s during late April, 1.12% lower in Spain, up to 2.49% lower in France, and 3.68% lower in Holland. In Germany and Italy, petrol and diesel without tax cost almost the same, while UK retailers on average charged at least 4.5p more a litre for diesel than petrol before tax.

The need for pricing transparency becomes blindingly obvious – if only to protect fuel suppliers and retailers from accusations of profiteering

Edmund King, AA president

Comment

“No doubt the UK fuel industry will have some reason for the higher diesel price, and it may be a fair one. But, for a fuel that transports food, goods and services around the UK and has driven more than 50% of new car sales in recent months, the need for pricing transparency becomes blindingly obvious – if only to protect fuel suppliers and retailers from accusations of profiteering,” says Edmund King, the AA’s president.

“It is of course excellent news that a two-car family’s petrol costs have fallen £9.83 in the past month and £18.49 since the record high in April, but could the price crash have happened more quickly, as it did in Europe? Pump price transparency, a key campaigning goal for the AA over the past seven years, could have ensured that the £4.5 million-a-day switch of consumer spending from pump to high street boosted other businesses and lowered inflation far sooner. However, drivers must brace themselves for another hike if the Treasury’s threatened 3p litre duty increase goes ahead on 1 August.”

Regional

Across the UK, Northern Ireland remains the most expensive region for petrol at 135.3p, charging on average 1.1p a litre more than the next most expensive area and 2.1p more than the cheapest region, Yorkshire and Humberside (133.2p).

However, the cost of diesel in the South East at 140.0p pips Northern Ireland (139.9) to become the highest in the UK. Once again, Yorkshire and Humberside is the cheapest at 138.5p a litre.

(21 June 2012)

Fuel price data supplied by Experian Catalist