June fuel price update

The devil in the diesel

retailers have on average this year been creaming up to £1 a tank extra off diesel car drivers

retailers have on average this year been creaming up to £1 a tank extra off diesel car drivers

UK drivers have had a month of relatively stable pump prices with petrol and diesel both adding around a penny to the cost of a litre.

However, June’s AA Fuel Price Report reveals that retailers have on average this year been creaming up to £1 a tank extra off diesel car drivers and up to £1.40 a tank extra off diesel van owners.

At present, the 1p-a-litre premium that fuel stations are generally adding to the cost of diesel adds 5,500 miles to the break-even point for a new car buyer who chooses diesel instead of petrol. Diesel cars typically cost £1500 more but the saving from better fuel efficiency should eventually recoup that*.

Petrol

For petrol car owners, after three 8p to 10p-a-litre swings in the petrol price over the past 12 months, a rise in the average price from 133.35p a litre in mid May to 134.61p in mid June represents something of a lull.

This slightly more stable position has been mainly due to an upward swing in the wholesale petrol price being offset by a stronger pound. The damage done by the price surge earlier this year continues to weigh heavily on demand for petrol in the US, with European petrol stocks last week increasing at what is normally a period of busy trading.

Over the odds

The UK average price of diesel has also risen by around 1p a litre in the past month, from 138.17 in mid May to 139.16 now. AA research, though, shows that diesel users are paying over the odds - typically an extra 50p a tank for car owners, at present.

The chart below shows the gap between the price of diesel and petrol at wholesale level (what retailers pay) versus the gap at pump level (what retailers charge drivers):

The gap between the price of diesel and petrol at wholesale level (what retailers pay) versus the gap at pump level (what retailers charge drivers)

Chart: Wholesale vs Pump

Comparing the price of diesel with the price of petrol, before tax, wholesale diesel over the past month has averaged less than 2.5p a litre more expensive than petrol. Yet, at the pump with tax also stripped out, diesel has averaged nearly 3.9p a litre dearer than petrol – a 1.4p-a-litre boost to the retailer margin.

From 14 March to the end of March, when delivered to retailers, the diesel-petrol price gap shrank from a peak of around 4.5p a litre to below a penny. At the pump, however, the price gap three weeks after peaking at 5.7p a litre had closed to 4p a litre – 1.8p adrift from where it should have been.

The clear message to diesel drivers is to take advantage of the greater range of prices locally – some forecourts are more diesel-friendly than others

Edmund King, president of the AA

Comment

“To be fair, there is often much greater variation in the price of diesel among retailers in a town than with petrol. However, on average, the profit margin on diesel is consistently at least a penny higher than with petrol,” says Edmund King, the AA’s president.

“The clear message to diesel drivers is to take advantage of the greater range of prices locally – some forecourts are more diesel-friendly than others.”

Regional

Regionally, less volatile petrol prices have allowed Northern Ireland’s to move closer to mainland areas. Unlike last month, when petrol there averaged 1.4p dearer than the next most expensive, the current 135.8p a litre average compares with 135.0p in Wales. Yorkshire and Humberside, averaging 134.1p a litre, pips London (134.2p) to the cheapest slot.

Diesel in Scotland and the South East is only 0.2p a litre shy of highest-priced Northern Ireland’s 139.8p. Yorkshire and Humberside remains the cheapest UK region for diesel at 138.7p


(21 June 2013)

Fuel price data supplied by Experian Catalist

Wholesale price data provided by fuelpricesonline.com

*According to Department for Transport statistics, the average fuel consumption of a new petrol car is 46.6 miles per gallon (10.25 miles per litre), compared to an average of 54.5 mpg (11.99 mpl) for a new diesel car. With petrol currently averaging 134.61p a litre, the new petrol car’s fuel cost is 13.13p a mile. With diesel currently averaging 139.16p a litre, the new diesel car’s fuel cost is 11.61p a mile, giving it a 1.52p a mile saving over the petrol car.

As the extra cost of buying a diesel car is typically £1500 more than the petrol equivalent, a car owner who switches from petrol to diesel needs to drive 98,684 miles before recouping that extra cost and starting to enjoy the benefit of diesel’s better fuel efficiency. Without the extra penny fuel retailers, on average, are adding to the cost of diesel, the 138.16p-a-litre pump would lower the cost per mile to 11.52p a mile and improve the saving to 1.61p a mile. That would cut the mileage needed to recoup the extra start-up cost to 93,168 miles – a reduction of 5,516 miles.

 

Flower power

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Fuel, Lights, Oil, Water, Electrics, and Rubber