Biggest fall in petrol prices since credit crunch
Average petrol prices in the UK have fallen by 5.48 p/litre since mid-September, the biggest monthly fall since the 11.5 p/litre petrol price collapse in November 2008. The cost of diesel is down almost 3.4 p/litre, according to October’s AA Fuel Price Report.
In the past month, the average pump price of petrol has fallen from 137.64 p/litre to 132.16p, while diesel has dropped from 142.50 p/litre to 139.12p.
The price falls have cut £2.74 off the cost of refuelling a small petrol car and £3.84 off the bill for a Mondeo-sized petrol vehicle. A family with two petrol cars will see the monthly fuel bill fall by £10.00.
With the UK consuming typically 1.55 billion litres of petrol a month, the 5.48p average price reduction has diverted around £2.83 million a day from the pump to the high street and other consumer spending.
For the past month, the wholesale price of petrol has been largely at the same level as it was during December. This has brought the current pump average back to where it started the year, at around 132p a litre. Retailers have responded with prices that are, for the most part, remarkably consistent with where they started the year.
Sainsbury’s decision to set a cap of 129.9p a litre at the end of September may have been a penny above Asda’s but the impact was dramatic. Towns like Newbury, where not having an Asda had left drivers paying up to 137.9p a litre for supermarket petrol just days before, saw the price crash by 8p a litre or £4 a tank.
However, in some towns without an Asda or Sainsbury’s, the price of supermarket petrol has fallen by 5p a litre but remains as much as 5p a litre more expensive than in neighbouring towns. Independent retailers have started to take advantage of these elevated prices – the forecourt of a petrol station in Wilton, Wiltshire, was filled with cars when it temporarily slashed its pump prices in early October. It and other fuel stations nearby continue to undercut the supermarket in Salisbury by up to 3p a litre.
The prospect of a further drop in pump prices is doubtful, with the pound losing some of its value against the dollar and a US budget agreement likely to strengthen the American currency. The averted industrial action at the Grangemouth refinery reduces the threat of higher oil and wholesale fuel costs in NW Europe.
However, the future of UK refineries is back under the spotlight.Market reports have been carrying “Europe awash with gasoline” and “Europe’s oil refiners choke on flood of US, Asian imports” headlines since the beginning of October. At the beginning of the month, trading houses predicted the closure of more refineries over the next two years. In May, the International Energy Agency noted that: “Increased European reliance on trading houses and third-party suppliers may also leave a growing share of European supply in the hands of market participants with a different set of incentives than those of refiners.”
A more than £2.50-a-tank cut in petrol costs for families is a dramatic improvement on its own. But, heading into winter with cars using more fuel, the timing couldn’t be better
Edmund King, AA president
Commenting on the drop in pump prices, the AA’s president Edmund King says: “A more than £2.50-a-tank cut in petrol costs for families is a dramatic improvement on its own. But, heading into winter with cars using more fuel, the timing couldn’t be better.
“Alongside Asda, Sainsbury’s decision to fully reflect the fall in wholesale prices has been a huge benefit for drivers and businesses. However, the AA is also encouraged by the growing band of non-supermarket retailers challenging the pricing of other supermarkets whose prices in many places are far less generous.
“The bigger picture, with the future of refineries in the British Isles under threat, is more worrying and the AA urges the Government to find ways to support them. Last year’s bitter experience of speculator-inflated pump prices, fuelled by refinery closures, should be warning enough – even before considering the loss of UK manufacturing jobs.”
The South East has benefited most from the return of wholesale petrol prices to December levels, averaging almost a penny a litre better off than 10 months ago. Wales fares worst, on average 0.4p a litre more expensive than in December.
Comparing average pump prices for mid October, Northern Ireland is most expensive for petrol at 132.9p a litre – despite seeing the biggest fall over the past month. London, the North, and Yorkshire and Humberside are jointly the cheapest areas at 131.9p.
Despite a 3.3p-a-litre reduction since mid September, Scotland remains most expensive for diesel at 140.1p while London is cheapest at 138.6p.