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£3-a-tank hit from post-referendum weaker pound

£3-a-tank hit from post-referendum weaker pound

Over the past year fleets have suffered on average a 5.4p-a-litre hike in pump prices as a consequence of the post-referendum weakening of the pound against the dollar, the latest AA Fuel Price Report reveals.  

With a typical fuel tank holding 55 litres, the cost of filling it has since the referendum (23 June, 2016) averaged £3 higher than if sterling had retained its previous value.  

For ‘white van man’, the penalty for filling an 80-litre tank with diesel has averaged £4.25 over the past 12 months.  

Petrol and diesel are traded in dollars per tonne on the commodity market and, when converting prices to pence per litre for the UK market, a stronger pound makes fuel cheaper at the pump and a weaker pound makes it more expensive.  

In the year leading up to the European Union referendum, the value of the pound against the dollar averaged $1.486. In the 12 months after, it averaged $1.269 or 14.6% less.  

Re-calculating each week’s average commodity price of petrol and diesel by using that week’s exchange rate from 12 months before, it is possible to get an indication of the impact of the weaker pound on the cost of petrol and diesel at the pump.  

Meanwhile, two supermarket pump price battles in June have helped to cut nearly 2p off the average cost of petrol and diesel on UK forecourts. Petrol averages 114.66p a litre, compared to 116.36p a month ago, while diesel averages 115.42p a litre, compared to 117.34p in mid-June.  

Strong competition between the ‘big four’ supermarkets has allowed them to recover the 4p gap between what they charge on average for petrol and the average price among other retailers. Diesel at supermarkets averages 4.3p a litre cheaper than at non-supermarket fuel stations.    

“In the first three months of this year, supermarkets saw their petrol sales drop by 6.2% compared to the same time the previous year. Against a general reduction of 1.8% among all retailers, it spurred a series of supermarket price wars in March, May and twice in June,” said Luke Bosdet, the AA’s fuel prices spokesman.

“These have created deep and enduring price cuts among all four of the supermarkets and, although the price of oil has risen over the past fortnight, drivers can still find petrol at 110.9p a litre in places.”