February 2014 fuel price update

Pump price postcode lottery leaves bitter sweet taste

Pump price postcode lottery leaves bitter sweet taste

Pump price postcode lottery leaves bitter sweet taste

Up to £2 a tank is being returned to drivers in small rural and coastal towns as the petrol price gap between towns with competitive pricing and those without closes from 5p a litre to as low as 2p. Drivers in those areas ask how it was acceptable for them to be over-charged for so long.

The latest AA Fuel Price Report shows that the average price of petrol has fallen by 0.83p a litre, from 130.46p in mid January to 129.63 now. Although it had bottomed out at 129.30p on the first Sunday in February, current averages mark a return to petrol pump prices last seen in February 2011.

Average diesel prices have fallen further, down 1.22p a litre from 138.24p a month ago to 137.02p in mid February. It too had dropped as low as 136.78p at the start of the month, a level last seen in July 2012.

Currency exchange rates

An 8% improvement in the value of the pound against the dollar accounts for much of the price drop. Had the pound remained at the level it was a year ago (worth $1.548), the wholesale price of petrol would have been 48p a litre as opposed to 44.5p now.  With VAT, drivers would still be paying around 134p a litre for petrol at the pump.

Neighbouring towns

The dramatic improvement in pump prices between neighbouring towns in many rural and coastal areas has also contributed to the general price fall. In November, the cheapest petrol in towns with uncompetitive fuel retailers cost as much as 6p a litre more than in neighbouring towns – despite the presence of major supermarkets in both. With the gap now closing to 2p or 3p a litre, the 3p-a-litre saving for Mondeo family with a 70-litre tank pumps more than £2 a time back into the family budget.

Investigation into pump pricing

Following the Office of Fair Trading’s decision not to turn its ‘Call for information on the UK petrol and diesel sector’ into a full investigation (30 January 2013), the AA will ask the Competition and Markets Authority (taking over the OFT’s consumers and competition role in March) to investigate and establish if pump pricing has discriminated unfairly against drivers in certain small rural and coastal towns.

The AA will ask the competition watchdog to recommend action for protecting drivers and businesses from a return to the 5p and 6p-a-litre pump price penalty for living in the wrong town.*

Traffic still down

The impact of inflated petrol and diesel prices, alongside the general financial squeeze on household budgets, continues to show itself on UK traffic figures for 2013. Latest statistics released last week by the Department for Transport reveal that, although economic recovery is showing itself in a 2.9% increase in motorway traffic compared to 2007, activity on other roads remains depressed.

Compared to the boom economic period of 2007, last year’s traffic on rural main roads was down 2.0%, urban main roads was down 4.0%, rural minor roads was 6.0% lower and traffic was 4.3% lower on urban minor roads. **

Across whole towns, for months if not years, drivers and businesses have been charged 4p to 6p a litre more for petrol compared to what retailers charged for the same fuel in neighbouring towns

Edmund King, AA president

Local price matching

“Across whole towns, for months if not years, drivers and businesses have been charged 4p to 6p a litre more for petrol compared to what retailers charged for the same fuel in neighbouring towns. It was called ‘local price-matching’ and it was supposed to be consumer friendly. But, without retailers prepared to challenge the inflated status quo, it was a curse and led to complaints from local politicians and a near revolt in Newbury,” says Edmund King, the AA’s president.

“Drivers in those towns don’t know whether to rejoice or get very angry that, would you believe it, supermarkets and other fuel markets can actually trade at 2p to 3p a litre above prices in cheaper areas. The change confirms the extent of the rip-off and what was, in effect, a fuel retailers’ toll for motorists coming on to their forecourts.

“Competition authorities need to consider a trigger whereby, if the majority of supermarkets and other retailers in a small town charge the same price which is 4p or more higher than in a neighbouring town, that is flagged up to the official watchdog who then asks retailers why this is happening. It is time for pump prices in small rural and coastal towns to be put to ‘reset’.”

Nationally and regionally

Across the UK, Northern Ireland remains the only area with petrol prices still averaging 130.0p a litre. London (129.8p), which had jointly enjoyed the cheapest average prices last month, now lags significantly behind as Yorkshire and Humberside leads the way with 129.2p a litre.

Scotland continues to suffer the highest average price for diesel at 137.6p a litre while, unusually, the East Midlands is cheapest at 137.0p a litre.

Flooding and extreme rainfall has made little impact on fuel prices across the South West region, with the average petrol cost jointly fifth cheapest in the UK at 129.7p and diesel in the middle of the pack at 137.2p a litre.


(21 February 2014)

Fuel price data supplied by Experian Catalist

Wholesale price data provided by fuelpricesonline.com

*In its January 2013 report, following the call for information on the UK petrol and diesel sector, the OFT recognised the price-matching behaviour of fuel retailers. Its analysis of the impact concluded that “in the majority of cases” what might be called an understanding between local retailers was not detrimental to drivers and road vehicle-reliant business.

** “Motor vehicle traffic (vehicle miles) by road class in Great Britain, annual from 1993”, published by the Department for Transport, 13 February 2014.

 

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