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Fuel prices hit two-month low as supermarket battle breaks out

Fuel prices hit two-month low as supermarket battle breaks out

A cut of ‘up to’ 2p a litre in the cost of fuel on supermarket forecourts has taken the average prices of petrol and diesel to their lowest since mid-January. 

But the generosity of the ‘big four’ has been far from consistent around the country, according to the latest AA Fuel Price Report.

The Report shows:
·         There’s still a 7p-a-litre supermarket price variation along some routes
·         Some non-supermarket retailers continue to undercut superstore rivals
·         But wholesale prices continue to fall and spring brings more MPG.

Despite last week’s price skirmish, UK average petrol and diesel prices are only half a penny lower than a month ago.  

The average UK pump price of unleaded petrol fell from 120.07p a litre to 119.31p. That ended a near three-month period of rising prices, which started with petrol at 113.89p a litre.  

Meanwhile, the average price of diesel was down to 121.44p a litre, having been at a peak of 122.35p on 20 February. The price cut came off the back of a steady rise since late November, when diesel typically cost 116.29p a litre.  

Last month, the AA had said that supermarkets had lost the plot on pump prices. The gap between them and non-supermarket retailers had narrowed to its closest in a year and independents were starting to undercut the superstores.  

However, despite the pump price cuts, supermarkets were still not all on the same page.  Sainsbury’s made the biggest cut since last month but, coming from a higher starting point, still averages at least 2p a litre more expensive than Asda and Morrisons - as does Tesco. 

Despite the overall disappointment of last week’s price cuts, drivers can be confident of a brighter outlook for the cost of motoring heading out of the winter, according to the motoring organisation. 

That is because:
Oil prices remain around $4 a barrel lower than recently, equivalent to a 2p-a-litre fall at the pump at a constant exchange rate.
Petrol refining margins in northwest Europe fell last week as stocks grew.    

The combined impact has been to knock the wholesale price of petrol down from 35p a litre in the last half of February to 32p.  

Most noticeably, warmer weather and commuting in the daylight means that many drivers will get as much as 3mpg more. That means an extra 33 miles per tank for the typical 11-gallon fuel tank, or a saving of three litres per tank (£3.50) for a 45mpg car.  

AA president Edmund King said: “The cut in supermarket pump prices is very welcome, particularly after the 6.5p-a-litre or £3.50-a-tank surge in petrol costs since late November.  

“Asda’s 2p-a-litre cut was bold when taking into account recent oil price and exchange rate volatility, which can explain why other supermarkets’ price reductions have been more muted.  

“However, from a driver’s point of view, living in the wrong town with an uncompetitive supermarket can be costly.  

“The AA’s price search tool shows that there are still non-supermarket retailers prepared to step in with lower prices when the local superstore drags its feet when passing on cuts in wholesale costs.   

“We expect that the fall in wholesale costs, providing it continues, will see bigger price cuts become more widespread. But, it still leaves the impression that many retailers are ‘feathering’ potential price falls.”