July fuel price update

Pump prices start to rise again

19 July 2012

A 10-week slump in UK petrol prices ended at the beginning of July

A 10-week slump in UK petrol prices ended at the beginning of July

A 10-week slump in UK petrol prices ended at the beginning of July as commodity speculation rolled back a third of the fall in wholesale petrol costs. Average petrol prices that had peaked at 142.48p a litre in mid-April bottomed out at 130.81p on 1 July before regaining more than a penny, according to July’s AA Fuel Price report.

At the start of this week, petrol averaged 132.18p a litre while diesel stood at 137.26p. A month ago, petrol averaged 133.77p a litre and diesel 139.31p.

Short-changed

At the bottom of the price slump, UK drivers should have seen an average saving closer to 14p a litre rather than the actual 11.67p – in effect, short-changing them by a £1 a tank.

From the middle to the end of June, the NW Europe wholesale price of petrol levelled at around the equivalent of 45p a litre, down at least 12p a litre from the peaks in late March and early April.  VAT would have extended the fall by a further 2p.

The difference between the average saving drivers enjoyed (11.67p/ltr) and what they should have got (14p/ltr) means:

  • a typical 50-litre tank refill should have cost £7 less than the mid-April peak but drivers actually saw a £5.84 saving;
  • a two-car family should have seen its monthly petrol costs fall £29.73 but, on average, saw a £24.78 reduction;
  • UK high streets should have received a £7.24 million-a-day boost from lower pump prices, but actually got £6.03 million instead.

NW Europe wholesale petrol prices, which had plummeted from above $1220 a tonne in early April to around $920 in June, bounced back on Monday to $1000.

after the massive boost lower pump prices have given to family budgets and non-fuel consumer spending, it would be extremely disappointing if much of the benefit is lost to commodity speculation

Edmund King, AA president

Comment

“This week, we have seen UK inflation for June fall very close to the Bank of England’s target. It makes you wonder how much closer it would have got had the full extent of lower fuel costs been passed on to drivers,” says Edmund King, the AA’s president.

“Additionally, after the massive boost lower pump prices have given to family budgets and non-fuel consumer spending, it would be extremely disappointing if much of the benefit is lost to commodity speculation.

King adds: “It was inevitable that pump prices would eventually rise again but, as has been the case so many times in recent years, the questions remain: should it be happening now and what is driving them up? Is it the fundamentals of supply and demand or speculation in the oil and wholesale fuel markets? Current evidence seems to suggest the latter.

“This week, the Government and the fuel retail industry discuss bringing greater transparency into the UK road fuel market. The benefits are blindingly obvious: drivers and business can see whether wholesale price movements are being passed on fairly at the pump – the retailers can justify what they charge for fuel.

“Transparency also flags up sudden surges in the wholesale price due to stock market activity. If there isn’t an obvious reason, such as a hurricane, refining problems or regional conflict, tracking such surges will allow politicians and consumer organisations to spot them and ask questions.”

Regional

Regionally, Londoners appear to be enjoying an Olympic fuel price boost. Prices in the capital are usually among the most expensive in the country but, at 132.0p for petrol and 137.2p for diesel, are not only lower than the UK average but not far off prices in the Midlands and northwards. Concerns about lower car use during the games may be encouraging suppliers and retailers to pitch pump prices at a more reasonable level.

Across the UK, petrol is cheapest in Yorkshire and Humberside at 131.6p a litre and most expensive in Northern Ireland at 133.4p. The South East is dearest for diesel at 137.8p and cheapest in Yorkshire and Humberside at 136.6p

(19 July 2012)

Fuel price data supplied by Experian Catalist