Pump prices under pressure to reach new lows
Average petrol pump prices have moved to within 2p of the six-year low recorded earlier this year, and may fall even below that before Christmas, according to the latest AA Fuel Price Report.
Diesel, which would normally become more expensive at this time of year, has dropped to its lowest price since the end of 2009.
Over the past 10 days, the wholesale price of petrol has fallen by more than 2p a litre although that has yet to be reflected in the average UK price.
Petrol price profile:
Diesel price profile:
The commodity price of petrol would have fallen further had refineries not been able to improve their margins, as they did during the summer. Last week, the International Energy Agency (IEA) reported a record three billion barrels of oil stockpiled globally. This pushed oil below $45 a barrel, lower than the level which allowed the UK’s average price of petrol to bottom out at 106.39p on 1 February.
However, while petrol cost $460-$470 a tonne in the commodity market in January, it cost $490-$500 through October into November – despite oil being even cheaper and the USA’s summer motoring season coming to a close. At the current $/£ exchange rate of $1.52, that $30 difference is equivalent to 1.5p at the pump.
UK drivers aren’t the only ones to spot the discrepancy. In the US, ‘rocket and feather’ entered the lexicon describing pump price movements over there.
In contrast, diesel drivers have fared much better. They would normally expect to see pump prices increase at this time of year as the demand for heating oil, which comes from the same part of the oil barrel as diesel, takes off in the US. However, on Friday, the IEA described stocks of diesel as ‘brimming’.
At the pumps, supermarket fuel pricing, as part of the Big Four’s strategy to counter the threat of newer lower-cost rivals, continues to set them apart from other retailers. The key question then is whether petrol sales, that have persisted this summer at levels previously associated with winter, continue on that track or drop even further. This would put even greater pressure on non-supermarket fuel retailers.
The ‘holy grail’ of fuel at £1 a litre still remains very doubtful, unless used only as a marketing gimmick. In Bristol, Costco lowered the price of petrol to 99.9p a litre this week*, although private membership costs £30.
UK drivers should make the most of lower pump prices while they last
Edmund King, the AA’s president
“It would be a good start to the run-up to Christmas if petrol prices fell to a new low for the year. However, this year’s lower pump prices have failed to reinvigorate pump sales in the UK – unlike in the US. That extra American demand boosted refining margins through the summer and these remain ‘robust despite high product stocks’, according to the International Energy Agency,” says Edmund King, the AA’s president.
“Although the price of oil is back into the low $40s, a surge to $50 a barrel a fortnight ago (based on a five-month-old report from China’s central bank) illustrates the continued volatility in the market. In short, UK drivers should make the most of lower pump prices while they last.”
they (drivers) are already paying on average the equivalent of an extra 2p a litre from the Insurance Premium Tax hike that came into force on 1 November
Edmund King, the AA’s president
King adds: “The greatest threat to drivers’ pockets comes from the Chancellor’s Autumn Statement on Wednesday. Relatively low fuel prices should not be used as an excuse to load more duty on to drivers. This is not only because weak fuel demand shows that drivers can’t afford it, but because they are already paying on average the equivalent of an extra 2p a litre from the Insurance Premium Tax hike that came into force on 1 November.
“Drivers will also be looking to see how the billions of pounds from fuel duty are spent – particularly in tackling the cracks in local roads, which seem to be popping up even before a cold front sets in, and the puddles, pools and ponds that have plagued roads in recent days.”
Across the UK, petrol is most expensive in London, averaging 108.4p a litre, and cheapest in Northern Ireland, at 107.6p. At 110.7p a litre, Scotland is dearest for diesel while Northern Ireland’s 109.7p is the lowest average price.