Fuel prices drop in June but will they increase again?

(Posted on 05/07/18)

After suffering the worst monthly petrol price rise in 18 years in May, June provided motorists with a little welcome relief at the pumps with the average price of unleaded falling by nearly 2p a litre.

However, all eyes will remain on the pumps as fuel price volatility has been a regular feature in recent months.

Data from the RAC’s Fuel Watch shows that petrol fell from 129.37p a litre across the UK to 127.59p after the supermarkets cut their prices in response to lower wholesale costs.

Diesel also reduced but only by 1.5p a litre from 132.32p to 130.74p. As a result, it now costs £70.17 to fully top up an average 55-litre family car with petrol (nearly £1 (98p) a tank less than it did a month ago) and £71.91 for a similar car that runs on diesel (86p a tank less than a month ago).

The greatest price reductions were seen across UK supermarkets, where an average of 2.4p came off the price of a litre of unleaded, and 2p off a litre of diesel. Drivers filling up at motorway services meanwhile saw no reduction at all in prices during June – with a litre of petrol remaining at a whopping 145p and diesel at 148p per litre.

RAC fuel spokesman Simon Williams said: “The big fuel retailers finally bowed to pressure in early June by cutting the price of both petrol and diesel at the pumps – offering some respite to drivers who just a month earlier had experienced the largest jump in average forecourt prices since the RAC began tracking prices.

“But while the price of oil slid back to around $72 a barrel in the middle of month, since this point it has been rising again – ending June nearer $76 a barrel and with wholesale fuel prices now also starting to rise again.

“So we remain in a period of real volatility when it comes to fuel prices. Late in June the Organization of Petroleum Exporting Countries (OPEC), which represents some of the world’s largest oil producing nations, agreed to increase global oil production. While this would normally signal cheaper oil, and in turn cheaper fuel prices, other factors have been at play – namely an escalating trade dispute between the United States and other major countries and the prospect of renewed sanctions placed on another oil-producing nation, Iran.

“At the same time, the pound remains comparatively weak against the US dollar, which reduces the buying power of UK fuel retailers. With fuel costing them more to buy in, this invariably means higher prices are passed on to drivers at the pumps. As a result, motorists sadly shouldn’t hold out much hope for cheaper fuel in time for the start of the school summer holidays.

“It has been reported that the Government is considering ending the fuel duty freeze. Aside from the fact that petrol and diesel in the UK are subject to some of the highest levels of taxation anywhere in Europe, it is also the case that the fuels are at their highest prices for more than three years. With a significantly weaker pound, it would only take a few further oil prices rises this year to see prices start to rocket.”