Monday, May 16, 2022

UK petrol and diesel prices: Supermarkets cut fuel prices by 2p per litre

ASDA has cut the price of both petrol and diesel at its fuel stations by 2p per litre, leading other supermarkets to follow. Motorists who fill up at one of ASDA’s branches will pay no more than 116.7p per litre for petrol or 118.7p per litre for diesel.

The news means ASDA’s diesel price has now dropped by more than 120p per litre over the course of two years. Sainsbury’s and Morrisons have both followed the trend, also cutting their prices by 2p per litre.

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RAC fuel spokesman Simon Williams commented: “The average price of fuel at the big four supermarkets has frustratingly been higher than it should be for the last two weeks. This has an adverse knock-on effect on drivers all over the country as smaller retailers have no incentive to compete, meaning everyone who drives loses out on getting a fair price for their fuel. It’s a shame drivers are made to wait for a 2p a litre cut rather than the supermarkets transparently passing on downward moves in wholesale prices.

“We strongly urge other retailers – big and small – to lower their pump prices so the average price of fuel comes down everywhere. The last ASDA fuel cut earlier this month led to the average price of unleaded coming down by 2p a litre so we expect to see an average price of 122p a litre in 10 days’ time. If diesel were to reduce by a similar amount that would yield an average price of 125p per litre, a price last seen nearly two years ago.

“A price of 116.7p for petrol is the lowest price ASDA has charged for nearly a year. They last sold diesel for 118.7p in early April 2018.”

According to RAC Fuel Watch data from 24 February 2020, the average price of unleaded in the UK now sits at 124.35p per litre, while diesel is 127.43p per litre. Both fuel types are likely to see their average prices fall in the near future.

UK petrol prices

The average UK price for a litre of petrol was 124.35p towards the end of February 2020. The cheapest supermarket to buy from was ASDA, which charged 116.7p per litre.

UK diesel prices

The average UK price of a litre of diesel was 127.43p towards the end of February 2020. ASDA was the cheapest supermarket to fill up with the fuel type, charging 118.7p per litre.

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. 

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.

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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…


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