Unleaded and diesel prices are falling faster than at any time in 2024 so far, the RAC has confirmed.
According to analysis by RAC Fuel Watch, both fuels are now almost 7p cheaper than they were a month ago.
The RAC also predicts prices will fall to a three-year low as early as September, thanks to low crude oil prices and a strong pound.
Petrol and diesel are now almost 7p cheaper than a month ago, according to analysis by RAC Fuel Watch
On 19 September, a litre of unleaded petrol cost 136.15 pence on average, almost 7 pence less than a month ago (142.86 pence) and 5 pence less than at the beginning of the month (141.26 pence).
Diesel also fell by 5p, from 145.99 per person to 140.87 per person, again almost 7p lower than this time last month (147.74p).
The sharp fall means both petrol and diesel are at their cheapest levels in almost three years, with drivers using unleaded able to save almost £4 on a full tank.
Prices have not fallen this rapidly over the course of a month since December 2023, when average pump prices for both fuels fell by more than 7p.
But even then, prices at the pump were considerably higher than today.
Simon Williams, from the RAC, said: “It’s really encouraging to see fuel prices coming down so quickly, which we know is good for both drivers’ pockets and keeping inflation under control.”
And in further good news for motorists, the RAC expects average petrol prices to fall to a three-year low as early as the end of September.
If prices continue to fall as the RAC expects, the average cost of a litre of petrol could fall to as low as 132p and diesel to as low as 138p over the next fortnight, which would be the lowest price drivers have paid for either fuel since July and September 2021 respectively.
If drivers are smart about where they shop, they can also take advantage of prices that are well below average: supermarkets currently charge 133.23p for unleaded petrol and 137.69p for diesel.
Motorists in Northern Ireland, where the RAC considers pump prices to be fairer, can fill up with petrol costing just £131.5 per person and diesel costing £134.2 per person.
RAC fuel spokesman Simon Williams said: “It’s really encouraging to see pump prices coming down so quickly, which we know is both good for drivers’ pockets and keeping the overall level of inflation in check.
‘Based on wholesale prices, which is what retailers pay to buy fuel in the first place, we know there is scope for further price cuts, so we very much expect that in the coming weeks we will see prices at the pump reach their lowest levels in three years.’
Why are gasoline prices falling?
The low price of crude oil
Oil prices are currently relatively low at $73 a barrel, thanks to lower global demand.
Oil prices are currently relatively low at $73 a barrel, due to lower global demand.
Oil prices hit a yearly high of $91 in April, so this $18 drop combined with a strong pound is helping to reduce costs at the pump.
Falling wholesale fuel costs result in cheaper supply costs.
The industry standard is a charge of 1 pence per litre at the pump for every $2 per barrel increase in the price of oil.
This means that a $20 increase will result in a £5.50 jump in the cost of filling a typical 55-litre tank of fuel.
And retailers’ margins are adding more than 6p a litre to the cost of petrol.
The Competition and Markets Authority reported at the beginning of August Provisional update of fuel consumption control on the road that ‘petrol retail spreads in the four months to June averaged 12.62ppl, which was 2.55ppl lower than in the previous four months but still more than double the average of 6.51ppl between 2015 and 2019’.
Those 6 people equate to an extra £3.30 that drivers have to shell out.
Relatively strong pound
A strong pound coupled with falling oil prices – which are helped by a drop in the UK inflation rate – greatly helps UK fuel retailers to “get more for their money” when they buy new stocks on the wholesale fuel market because fuel is traded in US dollars.
Is a fuel tax increase expected in the October budget?
“The removal of the fuel duty cut represents a £3.30 per tank shock to the budgets of the 28% of drivers who spend a fixed amount at the pump,” said AA chairman Edmund King.
Fuel duty was cut in March 2022, and the AA has warned that the impact of this should not be underestimated.
The car organisation is now calling on the new Government to continue with the fuel duty relief ahead of the Budget in October.
“Removing the fuel tax cut threatens to send millions of low-income drivers back into the era of ‘permanently high’ road fuel prices,” says AA president Edmund King.
‘The removal of the fuel duty cut would mean a £3.30 hit per tank (the standard 55 litre tank) on the personal and household budgets of the 28 per cent of drivers who spend a fixed amount when they go to the petrol station.’
The AA has warned that if the fuel duty cut had not been implemented in March 2022, UK motorists would have endured average petrol prices of more than 150p per litre from 21 February to 8 August.
Before Covid, the worst price UK motorists suffered was 142.48pa per litre in April 2012.
Fuel taxes represent an important source of revenue for the Government.
The Office for Budget Responsibility says fuel taxes levied on purchases of petrol, diesel and a range of other fuels raise £24.4bn a year for the Treasury.
That estimate includes a 5p per litre cut and a tax rate of 52.95p per litre.
This represents 2.3 per cent of all income and is equivalent to £867 per household and 0.9 per cent of national income.
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