November saw the largest petrol price drop in four years, with tumbling oil prices benefitting consumers at the pumps. Experts have criticised retailers, however, for not reducing prices to truly reflect falling wholesale costs. 

The pump price for a litre of unleaded fell from 130.61p to 125.43p last month – a difference of 5.18p, making it the biggest monthly drop since January 2015. Meanwhile, diesel also decreased 2.5p from 136.93p to 134.42p.

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However, the RAC – which provided the data – says retailers have not cut prices as much as they should have in reaction to a decrease in the cost of wholesale fuel. 

RAC fuel spokesperson Simon Williams said current prices remain “unnecessarily high”, though, with retailers choosing “not to pass on the savings” they had benefitted from to consumers. Williams considers a fair price for fuel in the current market is “around 120p a litre”.

The cost of filling up an average family-sized car with 55 litres of unleaded is now £68.98 – £2.85 less than it was in October. The equivalent price for diesel has dropped £1.38 to £73.19.

As of 29 November, the average fuel price at the UK’s four major supermarkets was 121.7p for petrol and 130.96p for diesel, while the same figures for motorway service stations were 145.40p and 153.70p respectively. 

Scotland saw the largest regional drop in petrol prices with a 5.61p fall, while the north-east had the cheapest unleaded at 123.92p. In contrast, the east of England was the most expensive place to buy petrol, costing 126.29p per litre. 

Unleaded01/11/201829/11/2018Change
UK average130.61p125.43p-5.18p
Scotland130.30p124.69p-5.61p
London130.88p125.28p-5.60p
North-east129.44p123.92p-5.52p
South-east131.42p126.04p-5.38p
South-west131.12p125.83p-5.29p
Yorkshire and the Humber129.93p124.77p-5.16p
East of England131.42p126.29p-5.13p
West Midlands130.27p125.24p-5.03p
Wales129.76p124.73p-5.03p
North-west130.15p125.30p-4.85p
East Midlands130.41p125.71p-4.70p
Northern Ireland129.79p125.24p-4.55p

As for diesel, Northern Ireland saw both the biggest price drop and the lowest price overall, falling by 3.05p to 132.60p per litre. The south-east was the most expensive at 135.17p. 

Diesel01/11/201829/11/2018Change
UK average136.93p134.42p-2.51p
Northern Ireland135.65p132.60p-3.05p
London137.38p134.72p-2.66p
North-east136.50p133.86p-2.64p
Scotland137.11p134.50p-2.61p
South-east137.78p135.17p-2.61p
Wales136.65p134.06p-2.59p
East of England137.47p134.92p-2.55p
West Midlands136.39p133.96p-2.43p
East Midlands136.89p134.49p-2.40p
South-west136.96p134.58p-2.38p
North-west136.78p134.46p-2.32p
Yorkshire and the Humber136.04p133.81p-2.23p

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.

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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. 

However, the AAs Fuel Price Report found that supermarket prices are getting closer and closer to prices on independent forecourts. The price gap between the Big-Four (Tesco, Asda, Sainsburys and Morrisons) and non-supermarket rivals has fallen below 3ppl for the first time in 12 months. 

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 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.

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.  

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Why is fuel so expensive on motorways? 

Recent figures from the RAC suggest motorists topping up at a motorway fuel station pay up to 15 pence per litre more than elsewhere. 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. 

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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.”

A new pilot scheme by the UK Government is installing electronic boards on the M5 between Bristol and Exeter that display motorway fuel prices. Similar systems can be found in countries like France, and if the trial is deemed successful, more motorways across the UK will see electronic signs posting fuel prices. This would provide some much needed price transparency for motorway drivers.

Whats 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...

Source: AutoExpress

December 5, 2018