Cost of Fuel at 4 year low
A litre of unleaded petrol is currently around 107p, down from 127p in January. With oil prices tumbling and a wholesale litre at 16p, we ask if prices are set to drop further?
Fuel prices have reached a four-year low caused by the coronavirus outbreak. A litre of unleaded petrol is down from 127p in January to 107p at the end of May, according to UK government figures.
Paradoxically, while it comes as good news for motorists, the lockdown is also the reason prices at the pumps aren’t expected to drop considerably, with retailers looking to increase margins as a result of reduced demand. It’s estimated that independent retailers are seeing a decrease in volume by up to 85%.
In April, when the wholesale price of petrol was around 16p a litre, the AA warned that petrol companies were not passing on cheaper oil prices to motorists. They calculated that drivers were being overcharged by more than £5 a tank. Each litre of petrol sold at the pumps includes fuel duty at 57.95p a litre, plus the retailers' margin, plus VAT.
The AA thinks that petrol sellers should be happy with a margin of 9p a litre, which would make the average pump price of petrol around £1 a litre when the wholesale price is 16p.
"Instead, the average pump price is higher because retailers say they need to charge 10p a litre more to offset the lower volumes of fuel they are selling," said the AA's fuel spokesperson Luke Bosdet.
The cost of filling up a typical 55-litre family hatchback has been around £2 cheaper during lockdown, with savings of around £1.63 on a similar size tank of diesel.
However, there is scope for prices to drop by a further 12p per litre, meaning unleaded could drop to under a pound at 96p per litre, with diesel falling to 102p per litre.
RAC fuel spokesman Simon Williams predicted that prices at the forecourts could fall with easing of lockdown restrictions and more ‘non-essential’ journeys being made: “As and when they do, drivers could be in line for even cheaper fill-ups in the coming months if wholesale prices remain suppressed, but that remains a big ‘if’ because as soon as more of us start driving the price of oil could begin to increase.”