Diesel starts to rise again but drivers still £5 a tank better off than in June
Early October’s $5-a-barrel surge in the price of oil, which threatened to add 2p to the pump price of petrol, failed to stop UK average pump prices falling a further 2p a litre over the past month.
Between mid September and mid October, the average pump price of petrol dropped from 111.16p a litre to 109.21p. This has extended the run of tumbling pump prices into a fourth month, having started after petrol peaked at 117.28p a litre on 22 June.
In contrast, diesel has started to rise again, having gone up from an average of 110.41p a litre in mid September to 110.96p now. It had reached 121.00p a litre in mid-June before the long summer decline which ended in the last week of September at 110.13p a litre.
Despite the half-penny increase, diesel car owners are still 10p a litre or £5 a tank better off than in June – and paying almost 20p a litre less than this time last year (130.47p).
It could be argued that the average price of petrol could be a penny a litre lower than it is. Over the past five weeks, the wholesale price of petrol has hit a plateau of 25.5p a litre, leading to the current pump average of 109.2p. Throughout January, wholesale petrol stabilised at around 24.0p a litre, with pump prices down to 106.5p from late January into early February.
Diesel drivers are faring better. At the start of the year, retailers were charging higher margins on diesel for the private motorist. Now, diesel’s 1.75p-a-litre higher cost than petrol at the pump largely mirrors the differential at wholesale level – a far cry from the 2p-a-litre bumping up of margins in January, which then rose above 5p during the ‘Great British diesel price rip-off’ early in the summer.
According to the oil industry’s rule of thumb (at a constant $/£ exchange rate), this month’s $5-a-barrel leap in the price of oil should have added at least 2p to the pump price of petrol. It temporarily added 6% to the commodity price of petrol but a strengthening pound and the short-term nature of the surge reduced any impact at the pump.
Strong competition among supermarkets has also helped to keep the lid on prices. The Big Four have now put significant price distance (an average 2p a litre on both petrol and diesel) between them and their non-supermarket rivals.
With petrol, this has helped to limit the pump price difference between supermarket towns with an Asda (105.7p) and those without (108.9p) to around 3p a litre. In small towns without any supermarkets the cheapest petrol tends to be around 110p to 113p a litre.
This month, supermarket fuel price promotions, whether extra reward card points or money-off vouchers, have so far been available equally to all customers – unlike the old ‘spend £50/£60 and get 10p off a litre’ vouchers which favoured families but discriminated against lower-spending pensioners, lower-income and single customers. This has given drivers the choice of homing in on lower pump prices or balancing their fuel budgets through pump promotions.
Latest UK fuel consumption figures, released by HMRC on Wednesday, show that despite average petrol prices falling below 110p a litre in September pump sales are struggling to respond. The 1.460 billion litres of petrol consumed last month was only marginally higher than the 1.455 billion litres in September 2014 – despite petrol costing 18p a litre less than a year ago. Year-on-year, last month’s diesel sales were up 3% to 2.374 billion litres. UK road traffic statistics indicate that growth is among commercial vehicles, particularly vans.
Across the UK, Yorkshire and Humberside sells the cheapest petrol, averaging 109.0p a litre, while East Anglia’s is the dearest, at 109.6p. Yorkshire and Humberside and Northern Ireland are the best areas for diesel, both averaging 110.6p a litre, while Scotland is most expensive with an average of 111.6p.
the spectre of commodity oil and fuel market players keen to drive up prices looms over UK drivers once again
Edmund King, the AA’s president
“This month’s $5-a-barrel surge in the price of oil was a reminder and a worrying sign of just how quickly the fuel price market can turn. Fortunately, it was short-term and the pound strengthened enough to take out most of the sting. However, the spectre of commodity oil and fuel market players keen to drive up prices looms over UK drivers once again,” says Edmund King, the AA’s president.
“Supermarkets have done a good job this summer in keeping the pressure on pump prices and, so far, they don’t seem ready to ease up. There again, with UK petrol sales depressed and fuel a clear advantage over low-cost supermarkets, the battle to keep forecourts busy is intense. Drivers have responded by keeping supermarket petrol sales steady between April and June this year, down only 0.2% compared to minus 4.8% for non-supermarket retailers.”