Petrol prices set to fall below £1 per litre

The RAC has announced that there is a big chance that petrol prices will fall below £1 for the first time in 6 years. This comes after a recent drop in wholesale fuel prices which could pass on a 2p per litre saving to consumers.

Since 2009 the price of petrol has been above £1 per litre and it actually rose to record prices of £1.41 in April 2012. The price of petrol is something which affects consumers and businesses throughout the country, with fuel being such a big expense in everyone’s budget.

The fall in fuel price comes after a fall in crude oil price which is currently trading at around $44 per barrel, also the lowest since 2009. The average cost of a litre of petrol at the moment is £1.07, however some supermarkets have already lowered their prices to £1.03 per litre. Adding in the expected 2p drop the RAC believes consumers will be buying petrol at £1.01 per litre within a few weeks, just 2p short of dropping below £1.

Supermarkets have used petrol prices in recent years as a way to draw in customers to their stores, with supermarkets such as Tesco giving their customers additional money off fuel. This have been a very powerful marketing technique for the supermarkets and has left traditional garages in a non competitive position when it comes to price.

There are some fears that the low petrol prices could encourage George Osbourne to increase fuel duty in his next budget, something that has not been done sine 2011.

The RAC fuel spokesman said ‘’While we are a way off average petrol prices reaching £1 a litre, there is a good chance the most price-competitive fuel retailers will take the plunge. Low oil and fuel prices appear to be here to stay as cutting supply to shore up prices is not an option for OPEC as it is dead set on not letting its competitors take any of its share. With yet more oil due to hit the market as Iran begins to produce again following its nuclear deal with the West, the long-term outlook has to be low oil prices for a further 12 months."