posted 10 months ago

£1 Per Litre Of Petrol - Sounds Like Wishful Thinking

Fill up now; there’s more chance of a white christmas than fuel prices going under the £1 per litre mark this festive season and prices could rise in New Year

Even though prices sit at the equivalent of 85p across the channel in France, it is highly unlikely that the UK will see such a significant drop. The UK is currently the highest levied tax contributor in Europe when it comes to fuel and prices have reached as high as 140p per litre this year as a result.

Lower fuel prices

Rumours are circulating - many believe petrol dropping below the £1 mark by Christmas is more realistic this year than it has been for a long time, and here’s why:

  • Crude oil prices are now at a 6 year low, the lowest since February 2009 and we’re still yet to see this reflected on the forecourt. Implying there could be a further dip yet to come in the price we pay.
  • As the festive period draws closer and closer, supermarket retailers are desperate to stand out from one another. The competition is tighter at this time of year than any other and now that most major supermarkets also sell fuel, discounts and price drops are likely to be reflected at the pump.
  • The price has already plummeted for the ‘Black Friday’ event that swept the western world. Asda cut their prices to 99.7pence and 103.7pence for petrol and diesel respectively from midday on the 27/11/2015. Morrisons jumped onboard this opportunity too but customers had to spend over £40 in-store to qualify for the lower rates.
  • Crude oil is a whole $13 cheaper per barrel today than it was back in 2009, which is the last time prices of both petrol and diesel were under £1. Other than the small issue of crippling fuel duty that we now pay, there’s no reason we can’t achieve similar results this Christmas.
  • The Chancellor didn’t levy a tax hike. Some expected that George Osborne would raise fuel duty by 2p for Diesel vehicles in his Autumn Statement and spending review, however, that never materialised.

Despite these rumours, the consensus seems that fuel is more likely to increase in the New Year so our advice is to fill up now while it is cheap as petrol and diesel could rise by 3p per litre just a few days into 2016.

Petrol Prices

No dramatic drop

Brian Madderson, Chairman of the Petrol Retailers Association said, “We are not quite so bullish about such a dramatic drop in UK national average as calculated and distributed by Experian Catalist fuel prices.”

Madderson explained: “It is the UK wholesale cost in pence per litre (PPL) that drives pump pricing and there is no linear relationship to any change in crude oil prices quoted as US$/barrel.”

RAC fuel spokesman Simon Williams said: “Events in Paris made oil traders react on Monday (16/11/2015) causing a sudden dip in the price of Brent crude to the $40 mark which has not been seen for more than six years.”

He continued: “With oil prices already consistently low as a result of too much supply, the dip – even though it will be temporary – should still be reflected in wholesale prices, making fuel cheaper for motorists.”

Mr Williams also added that “We hope retailers will be quick to pass on these new wholesale fuel savings at the pumps to make the cost of litre cheaper still.”

Weak pound

The USD to GBP exchange rate is highly influential when analysing whether fuel prices and over the last four weeks, the pound has weakened from 1.55 to 1.50 as analysts predict a US interest rate rise in the New Year.

On the back of this, the pound could weaken further which will impact wholesale costs by up to 3ppl.

Brian Madderson also told us that: “Wholesale cost for petrol was the same last night as 3 weeks ago with not much sign of reducing levels thus far.”

He added: “Whilst there have been sporadic instances of below £1.00 per litre for petrol already with a certain supermarket willing to sell at below cost, the UK average for petrol is still above 106ppl.”

Madderson continued, “Our view is that provided:

    1. GBP does not continue to weaken towards $1.45
    2. Refinery margins do not rise
    3. Brent crude drops for a sustained period below US$40/barrel

Wholesale costs will fall further but not far and fast enough for all the UK market to enjoy a sub £1.00/litre average by 25th December.”

Petrol Prices


Fill up now

The Automobile Association also agreed with the Petrol Retail Association and warned drivers to make the most of the relatively cheap fuel.

A spokesman from the AA said: “I think it’s doubtful, we cannot foresee fuel prices dropping below £1 per litre. There are some retailers like a few of the supermarkets that may coincide a drop in price per litre with a deal in store but we believe it is highly unlikely to see a straight forward drop at the forecourts.”

He added: “The wholesale price needs to come to down to 40$ a barrel and there is no sign of this happening to achieve £1 per litre at the pumps. Our advice is enjoy the current prices while it lasts as there is a huge chance the current price will not last long into 2016. Volatility is on a smaller scale when compared with 2011 but if the market sees a reduction in production then there will be spikes in prices at the pumps.”

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