Drivers emerge from third pump price storm in 12 months
A new crash in wholesale fuel prices is expected to lop another 3p off the average pump price of petrol within two to three weeks, according to the latest AA Fuel Price Report. The petrol price storm that started in January, helping to push the UK’s monthly petrol consumption to a record low in February, has finally blown itself out.
With the latest supermarket ‘price war’ registering a 0.6p-a-litre drop on Tuesday, the average UK price of petrol has fallen to 136.89p a litre, 3.02p lower than a month ago (139.91). The average pump price of diesel, reflecting falling demand in winter heating oil, has dropped 4.62p in a month, from 146.38p a litre in mid March to 141.76p now.
Since Thursday (11/04), the wholesale price of petrol has slumped to 47p a litre. That is still 2p above the level that created the 132p-a-litre petrol price plateau at the pumps throughout Christmas and into the second week of January.
If that persists into next week or costs fall further, a 134p-a-litre UK average should become a reality. Earlier this week, a substantial number of supermarket and non-supermarket fuel stations were already selling petrol at 132p-133p a litre in Staffordshire, Yorkshire, London and other areas.
The chart below compares the movement of wholesale petrol prices (blue) and pump prices (red) during the latest petrol price surge, in pence per litre. In mid-March, Sainsbury’s dropped their price of petrol by a full 4p-a-litre which initiated the first of the mini pump-price wars over the past month. However, the switch from winter to summer grade petrol, the latter around 3p a litre more expensive in NW Europe on 25 March, temporarily reversed wholesale petrol’s fall. Alongside that, speculation that the US motoring season was about to start while Chinese economic growth would push up oil demand, pressured a further price increase. Last week, though, the wholesale price had collapsed and averaged just 2p above its Christmas starting point.
This is the third 8p-10p a litre swing in the average price of petrol in 12 months. The first set the current record petrol price at 142.48p a litre in April 2012, before collapsing back to around 131p in July. The second surge lifted the average price of petrol to 140p in October, before falling back to 132p in December. And the latest surge peaked on 3 March at 140.03p a litre before the current price crash.
Although the falling oil price, down from $110 a barrel to just below $100 on Tuesday, contributed substantially to the fall in the price of petrol, a glutted petrol market resulting from speculator-driven prices and falling driver demand pitched the market downward – yet again. Last Thursday, it was reported that gasoline inventories in NW Europe were at their highest level for five years, while stocks on the east coast of the US were two million barrels higher than last year. Explaining the glut, one trader was quoted saying: “Demand in Europe has been killed.”
oil and fuel price speculation has swung back and forth through the fuel market like a wrecking ball: smashing family budgets, pulverising fuel demand, and rocking the foundations of fuel retailer and other business viability
Edmund King, AA president
AA president, Edmund King, comments: “Last April, UK petrol consumption fell. In October, it did the same. And in February, the UK sold the lowest volume of petrol in 23 years of recording. In the past 12 months, oil and fuel price speculation has swung back and forth through the fuel market like a wrecking ball: smashing family budgets, pulverising fuel demand, and rocking the foundations of fuel retailer and other business viability.”
“The last 12 months have shown pump price volatility is more acute than ever, driven largely by speculation. Drivers and business are hugely vulnerable to these wild, often unfair, swings in price and deserve better. Greater price transparency is essential to help drivers see what is coming and prepare themselves. Wholesale prices are transparent in the US, Australia and South East Asia. The 10 to 14 days it takes for a wholesale price rise change to register at the pumps would be ample warning for UK families to adjust their budgets accordingly and try to ride out the storm.
“At least, though, the current prices are going in the right direction – giving drivers a breath of optimistic spring air.”
Regionally, the remarkable turnaround of pump price fortunes for Londoners continues: this month the cheapest in the UK at 136.1p a litre, compared to Yorkshire and Humberside’s 136.3. Northern Ireland stands out as the most expensive region, its 137.8p-a-litre average nearly a penny higher than the national level.
Yorkshire and Humberside remains the cheapest region for diesel, its 140.8p-a-litre average 2p higher than Northern Ireland’s (142.8p), the UK’s dearest.