UK petrol and diesel prices: 5p drop due in next fortnitght
Petrol and diesel prices remained steady in October, but experts say second lockdown should drive prices down soon
Fuel prices remained steady in October, with a drop of around 5p per litre due in the next fortnight due to the second national lockdown.
Petrol prices dropped marginally from 114.53p on average to 114.43p per litre, while wholesale unleaded prices saw a 4.62p price drop. RAC Fuel Watch, which provided the data, reports Asda has already implemented a price cut of 2p per litre for petrol and 3p for diesel, with other supermarkets and retailers set to follow.
The RAC says diesel has been overpriced for two months now. Wholesale prices have fallen, just like those of petrol, but pump prices only came down 0.27p per litre on average in October to 117.82p. At supermarkets, petrol and diesel now average at 109.6p and 114p per litre respectively.
It now costs £60.29 to fill an average 55-litre family car with petrol, or £62.56 with diesel. In addition to Covid-19 and the related lockdown, it's thought the US election result may have an impact on prices, but what that impact might be is unknown.
RAC fuel spokesman Simon Williams said: “It’s likely to be a case of déjà-vu for drivers this month as once again fuel prices are starting to fall just at the point when we’re all driving less as a result of a coronavirus lockdown. It’s good to see Asda leading the way this morning with an initial price cut and we now need other retailers to follow suit as quickly as possible."
He added: “Diesel drivers... have reason to feel particularly hard done by, as arguably they have been paying over the odds for the fuel for two whole months now. We strongly urge retailers to lower the price of diesel, both for businesses and the country’s 12 million plus diesel car drivers.”
What makes up the price of UK fuel?
The price of fuel can be divided into three sections; the taxes imposed by the Government, the costs of drilling, refining and transporting, and the profit margins for the fuel companies.
For petrol, diesel and bioethanols, the Government gets around 65 per cent of the overall cost through fuel duty and value added tax (VAT). The fuel duty represents the fixed price of fuel – it stays the same regardless how much overall oil prices fluctuate. Currently, the Treasury adds 57.95 pence to each litre of fuel through fuel duty, and another 20 per cent through VAT. How much you pay in VAT depends on how much fuel you purchase.
The second biggest chunk comes from the wholesale costs of the fuel itself. The wholesale cost is a combination of currency exchange rates, global oil prices, and even domestic supply and demand.
Finally, the smallest share of what motorists have to pay for fuel comes from the filling stations themselves. A typical fuel station profits around 2p-5p per litre, but tough competition can drive this down further. Supermarkets increasingly use fuel prices as a loss leader to tempt customers in.
Why is supermarket fuel cheaper than an independent forecourt?
Supermarket forecourts usually offer the cheapest fuel prices and this is because of the market power supermarkets hold. Companies like Asda, Tesco, Sainsbury’s and Morrisons are all in competition with one another, so they keep fuel prices as low as possible hoping that when motorists come to fill their tank, they might do their weekly grocery shopping, too.
There are persistent rumours that supermarket fuel contains fewer additives and is of lesser quality than fuel from traditional forecourts, but there’s little hard evidence of this. All fuel sold in the UK has to abide by the standards set in the Motor Fuel Regulation.
Why is fuel so expensive on motorways?
Motorway fuel stations argue the reason their prices are higher is that many of them are open 24 hours a day and offer more services than a regular forecourt. Motorway fuel stations also pay high rent prices for the buildings they operate.
In more remote areas, fuel is often more expensive because of the higher transport and supply costs, but according to RAC fuel spokesman Simon Williams, this doesn’t apply to motorway stations: “We can see no reason why motorway fuel should be so much more expensive. In fact, arguably it is much easier from a delivery point of view than it is getting fuel to urban filling stations.”
Why is diesel more expensive than petrol?
Although diesel and petrol are taxed the same by the Treasury, historically diesel has been more expensive than petrol, as domestic refineries have struggled to meet demand. This has forced the UK to import diesel from other countries at a greater rate than petrol. In addition, diesel prices are pushed up by the cost of the additives that go into the fuel.
Furthermore, the gap between UK petrol and diesel prices widens during the winter. The end of the US “driving season” means retailers have a surplus of petrol they can’t export, so they sell it here at a lower price. Diesel demand, meanwhile, increases across continental Europe, where the fuel is commonly used in heating oil.
However, the influx of cheap diesel from countries like Saudi Arabia has turned the tide, swinging diesel wholesale prices closer to that of petrol, and bringing the pump price down with it.
What's your view on fuel prices in the UK? Do we pay too much for our petrol and diesel? What would you do about it? Join the debate in our comments section below...