Petrol Prices

Higher prices send fuel consumption plummeting

30 March 2010

As UK petrol prices soared to within 2p of the record last weekend, new figures show that rising prices in the last quarter of 2009 pushed down pump sales three times faster than at the same time in 2008. Lacklustre fuel-price competition among most supermarkets meant that they came off worst in late 2009, says the AA.

Petrol sales fell 9.9% between October and December 2009, with supermarket sales down 14.6% compared to a decrease of 6.1% for other fuel retailers.

In the last three months of 2008, with the impact of the 'credit crunch' being felt, overall petrol sales fell 3.7%. However, back then, supermarkets boosted their sales 1.6% as they raced each other to pass on falls in the wholesale price and attract customers/

Petrol retail sales


Overall

4th Qtr 2008 – 4.067 million tonnes
4th Qtr 2009 – 3.666 million tonnes (-9.9%)

Hypermarkets

4th Qtr 2008 – 1.803 million tonnes
4th Qtr 2009 – 1.540 million tonnes (-14.6%)

Other retailers

4th Qtr 2008 – 2.264 million tonnes
4th Qtr 2009 – 2.125 million tonnes (-6.1%)

Between October and December 2009, the price of petrol rose from 105.3p a litre to 107.85, adding £1.28 to the cost of a tankful and £5.41 to the monthly fuel bill for a family with two cars. In the same period in 2008, petrol prices plunged from 110.0p a litre to 87.64p, reducing the cost of a tankful by £11.18 and a month's fuel for a two-car family by £23.74.

Petrol prices last weekend (28 March) hit 117.7p, nudging ever closer to the record high of 119.7p (July 2008).

Heavy snow will have impacted severely on sales in the run-up to last Christmas and out-of-town stores may have been less easy to reach than fuel stations along main roads. However, a more than 16% change of fortune for supermarkets is unlikely to have come solely from a week's interrupted trading.

Overall, UK petrol sales for the whole of 2009 were down 4.3% compared to 2008, while diesel sales fell 1.8% in the same period. The annual Government figures show that supermarket sales fell 9.8% compared to just 0.1% for other retailers.

Comment

"We know through our AA/Populus surveys that £1.10 is the point at which UK drivers' tolerance of rising fuel prices begins to run low. With greater restriction on family budgets from pay restraints, lower savings income and other fallout from the credit crunch, it should come as no surprise that rising fuel costs started to hit sales below that point," says Paul Watters, the AA's head of public affairs.

"We have consistently argued that putting more fuel duty on petrol and diesel while prices are this high inflicts more pain for no gain. If the 2.35p duty and VAT increase in the autumn of 2009 gave the Treasury an extra £1.18 from a 50-litre tankful of petrol, a 10% or five-litre reduction in overall petrol consumption left Government coffers more than £2 a tank worse off.

Watters adds: "Supermarkets, during the petrol wholesale price surge earlier this year, initially held back from passing on the full impact while most other retailers didn't. However, in autumn 2009, most supermarkets competed on price only where they had to. Although the decision whether or not to refuel regularly at a supermarket is a matter of swings and roundabouts, these new sales figures show that drivers can tell a good deal from a bad deal and are prepared to switch retailer.

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31 March 2010