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january 2018 AA fuel price update

$5 drop in oil price brings minimal return for drivers

An end to seven and a half months of rising prices, but supermarket price battle is more jaw-jaw than war-war

17 February 2018

Drivers who went to fuel forecourts last weekend expecting a price war were left scratching their heads. For many, they will be doing the same this weekend.

Despite a more than $5-a-barrel drop in the oil price and a 4p-a-litre drop in petrol wholesale costs, average UK pump prices on Wednesday were 121.60p a litre for petrol and 124.01p for diesel. Before the weekend, they were respectively 122.16p and 124.87p. 

Ironically, the AA Fuel Price Report finds that, on Monday, petrol was more expensive than a month ago - despite the declared ‘up to’ 2p fall in supermarket pump prices.

Fuel consumption

An end to seven-and-a-half-months of rises

The good news is that a seven-and-a-half-month rise in pump prices has come to an end. That started on 2 July, when petrol bottomed out at 114.33p a litre and has been on the up since. Diesel hit a summer low of 115.02p on the same day.

>UK petrol and diesel prices topped out respectively at 122.34p and 125.08p on 1 February and were down a fifth of a penny by last Friday when the supermarkets clashed. This indicates that some non-supermarket retailers had already taken advantage to undercut the superstores.

Wholesale prices

Retailers will argue that wholesale prices feeding into today’s pump prices, from 10 to 14 days ago, only started tumbling in recent days. The previously-mentioned undercutting of supermarket prices by competitive oil company sites, before the superstores declare a price war, is a well-established pattern.

Stronger pound

Bright spots in this month’s report is the continued lower cost of refined product against the cost of oil, compared to the summer. Also, the stronger pound has knocked at least a penny a litre off the wholesale price of petrol and diesel heading to the pumps – average commodity prices of petrol and diesel this week are comparable with those in the first week of December.

Supermarkets

On the face of it, three of the Big Four supermarkets look to be almost neck-and-neck on the price of petrol and much cheaper than the oil companies. And, with Asda announcing on Friday that petrol prices would be no higher than 118.7p, the averages look even better.

Many rural towns saw little of the savings

“Pump prices had already started falling before last weekend’s supermarket price skirmish as other forecourts saw an opportunity to undercut the superstores. However, even with all the price-cutting fanfare, many rural towns saw little of the savings as the non-Asda supermarkets played the averages game – prices averaging well on paper but a different story for those living in uncompetitive towns,” says Luke Bosdet, the AA’s fuel price spokesman.

even with all the price-cutting fanfare, many rural towns saw little of the savings as the non-Asda supermarkets played the averages game
Luke Bosdet, AA fuel price spokesman

“This was entirely predictable because it is a pattern that established itself last year with at least five supermarket price tussles after relatively small falls in wholesale costs. You need Tesco, with 504 sites compared to 306-334 for each of the other big supermarkets*, to join the battle wholeheartedly before you get a UK-wide price drop of 1p or more over a weekend.

“Overall, though, pump prices as we exit winter look significantly better than at the start of it. Although oil may recover after taking a drubbing in a bear market and fuel commodity prices will inevitably go up as the summer motoring season approaches, an end to seven and a half months of rising prices should give drivers a boost heading into spring. It all hangs on how soon retailers across the board pass on savings that are now clearly more than just a flash in the pan.”

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