September fuel price update

Stuck on a spike – pump price surge storm enters 10th year

This year, average UK petrol prices have already seen an 11p-a-litre or £6-a-tank upward surge

This year, average UK petrol prices have already seen an 11p-a-litre or £6-a-tank upward surge

Early September marked the 10th anniversary of Hurricane Katrina’s aftermath. It also commemorated the start of a storm of surges and collapses in UK pump prices, now entering a 10th year.

This has buffeted UK drivers with getting on for a decade of 8p to 20p-a-litre swings in the cost of fuel at the pump, the latest AA Fuel Price Report notes.

This year, average UK petrol prices have already seen an 11p-a-litre or £6-a-tank upward surge (106.39p – 1 Feb, 117.25p – 14 July), before the late summer drop-off. Over the past week, however, forecourt petrol prices have been becalmed at around 111p a litre.

  • Petrol pump prices bottom out at 111p after further 3.5p fall
  • Supermarkets enjoy clear price advantage
  • Oil back to $45, but commodity petrol 10% more expensive
  • 10th anniversary of ‘rocket and feather’ prices

The AA report shows that, since mid August, UK drivers have continued to enjoy lower pump prices. Petrol now averages 111.16p a litre, compared to 114.84p a month ago. The average price of diesel has also fallen in the past month, down from 111.93p in mid August to 110.41p now.

However, while the fall in the wholesale petrol cost has bottomed out at around 27p a litre, the cost of diesel to the trade has gone up a penny in the past fortnight to 28p a litre.

For the moment, diesel remains cheaper than petrol at the pump, and average forecourt prices for both have been helped considerably by substantially lower prices at supermarkets compared to most of their rivals.

Price of oil

The price of oil, despite falling back again after a brief return to $50 a barrel in early September, has failed to maintain the downward pressure on pump prices it had in August. Although part of that is due to a weaker pound against the dollar, the continued strength of gasoline in commodity markets has countered much of the benefit of lower-priced oil.

In January, when Brent crude cost $46-$48 a barrel, the commodity price of petrol hung around the $470 a tonne mark. Over the past fortnight, despite oil returning to January’s level, commodity petrol has been $50-$60 a tonne or at least 10% more expensive than earlier in the year. Consequently, further predictions of a return to £1 a litre at UK pumps have so far proved even more off-target than at the start of the year. 

Katrina’s aftermath – the start of the pump price storm

September 2005 stands out as a landmark in more than 115 years of the AA’s reporting of fuel prices in the UK. Firstly, it started a rollercoaster trend in commodity and pump prices.

Fuel price surges since 2005

Fuel price surges since 2005

Secondly, it introduced the UK to ‘rocket and feather’ pricing at the pump. A leap in the cost of petrol, as the US imported huge quantities after Hurricane Katrina ravaged production, led to average UK pump prices shooting up from 91.5p a litre at the end of August 2005 to above 96p a fortnight later. Panic buying set in and the threat of fuel protests re-emerged.

The fuel industry moved quickly to try to reassure drivers, telling them that re-stabilised petrol demand and wholesale prices would quickly lead to a 4p-a-litre fall in the cost of petrol on UK forecourts*. This was backed up by announcements of price cuts from supermarket and non-supermarket retailers.

The problem was, it took until the second week of November 2005 for the UK’s average price of petrol to return to 91.5p a litre.

The first £1 a litre

Thirdly, it was the first time the £1 litre appeared on mainland UK forecourts. Rural petrol stations started to charge as much as 105.9p a litre**, before prices fell back. In the end, despite the average diesel price reaching 99.73p in late July 2006, the £1-a-litre UK average finally arrived in late 2007 – with diesel hitting the mark on 18 October 2007 and petrol on 6 November 2007.

Beyond September 2005, petrol reached an average of 119.7p a litre in mid July 2008, with diesel peaking at 133.25p, just before the start of the financial market crash. UK pump prices then hit their current record in mid April 2012, with petrol soaring to 142.48p a litre and diesel 147.93p

The need for fuel price transparency

Edmund King, the AA’s president

Start of the UK fuel price storm

“September 2005 marked the start of the UK fuel price storm, ominously ushered in by a hurricane. Looking back, it carried all the warning signs of what was to come: dramatic fuel price spikes, rocket-and-feather pump price movements, driver hardship and protests, and the dawn of petrol and diesel costing more than a pound a litre,” says Edmund King, the AA’s president.

“Almost immediately, the AA spotted the need for fuel price transparency, showing the relationship between oil, wholesale and pump prices – to inform and warn British drivers of price movements, and to enable the fuel industry to justify the prices they charge.

“With UK motorists still complaining that lower oil prices are not being reflected at the pump, the need for fuel price transparency remains as relevant now as it was 10 years ago. While governments in Australia, the USA and South East Asia have accepted the need to throw their motoring consumers a lifeline and provide transparency, the UK’s has left drivers to ride out the storm.” 

UK national and regional

Across the UK, Scotland has at last lost its tag as being the most expensive for road fuel, that going to the North for petrol (111.7p/ltr) and East Anglia for diesel (111.1p/ltr). Cheapest areas are Wales and the East Midlands for petrol, both averaging 111.0p a litre, and Yorkshire and Humberside for diesel, with an average of 110.0p a litre.


(22 September 2015)

Fuel price data supplied by Experian Catalist

Wholesale price data provided by fuelpricesonline.com

* http://news.bbc.co.uk/1/hi/uk/4255780.stm

** http://news.bbc.co.uk/1/hi/england/4215996.stm