Update 16/06/17: Asda has kicked off the latest round in the fuel price war by cutting 2p per litre from the cost of diesel and unleaded petrol. Tesco, Sainsbury and Morrisons quickly followed, each also slashing prices by 2p per litre.
Commenting on the cuts, RAC spokesman Simon Williams said:
“This is excellent news for motorists just as summer has finally arrived. It should now encourage every other retailer to follow suit and lead to a much-needed ‘price cut’ chain reaction across the country.”
Filling up at my local garage yesterday, I also noticed another big change — the price of diesel was less than the price of petrol. According to Mr Williams, “a cut to the price of diesel is long overdue as its wholesale price has been lower than petrol’s for weeks”. It looks like a rare bit of good news for diesel drivers.
The price of oil has remained stubbornly low this year and has fallen further in June, dropping below $50 per barrel once more.
After seeing prices rise in April, motorists enjoyed an average reduction in May of 2p per litre for petrol and 2.5p per litre for diesel. But the RAC is calling on fuel retailers to ensure their prices remain competitive, by passing on fresh savings to customers.
According to the RAC, fuel retailers should already be benefiting from lower wholesale costs. The motoring organisation believes that petrol could be cut by another 2p per litre, while diesel could fall by an average of 4p per litre.
RAC fuel spokesman Simon Williams said:
“We have been monitoring supermarket fuel prices closely since the oil price began to tumble hoping that we would see them come down, but sadly that has not happened yet. In fact, one even increased prices by half a pence a litre.”
Speaking last Thursday, Mr Williams said the RAC believes supermarket petrol should fall from a an average of 113.55p per litre to “nearer 111p a litre”. Meanwhile, supermarket diesel “is on average 114.33p a litre” but should now be “around 110.5p a litre”.
According to the RAC, the wholesale price of diesel is now lower that of petrol. But fuel retailers are still charging more for diesel than petrol.
“Likely to come down”
According to the RAC Fuel Watch service, which monitors prices and forecasts short-term price movements, the price of diesel is “very likely to come down” from its current UK-wide average of 117.59p per litre. Unleaded petrol is merely “likely to come down” from its UK average of 116.56p per litre.
Lower oil and wholesale prices suggest petrol and diesel should fall over the coming days.
But it’s worth noting that the other big factor affecting fuel prices is the exchange rate between the pound and the US dollar. Oil and fuel are always priced in dollars. The USD/GBP exchange rate has fallen from $1.29/£1 to about £1.27/£1 since last week’s general election. This would have the effect of adding about 1.2% to the cost of fuel purchases priced in dollars. That’s loosely equivalent to 1.2p extra for every £1 of wholesale costs.
In my view, fuel prices may edge lower over the next week or so. But I wouldn’t expect big falls from current levels.