Finance / Falling oil prices ‘may make fuel costs cheaper than bottled water’
Falling oil prices ‘may make fuel costs cheaper than bottled water’
14 January 2016
Fuel could become cheaper than bottled water if the price of oil continues to plummet, motoring experts have said.
Oil prices have fallen by 30% since early December, with Brent crude sinking to 30 US dollars a barrel earlier this week.
Many analysts are predicting it could tumble even further, with Standard Chartered warning that 10 US dollars a barrel is a possibility.
The RAC said this could lead to UK motorists paying just 86p per litre (ppl) for fuel, as long as the pound does not continue to weaken against the dollar.
In December major supermarket fuel retailers cut petrol to under £1 per litre for the first time since 2009 – excluding promotions – while diesel was given the same treatment last week.
Average prices across the country are 102.5ppl for petrol and 103.2ppl for diesel.
RAC fuel spokesman Simon Williams said: “With no apparent end in sight to the freefalling price of oil, motorists can expect some really low fuel prices in 2016.
“Breaking through the pound a litre price point for both petrol and diesel was clearly a welcome landmark, but it looks as though there is more to come.
“In fact we may get to a bizarre time when a litre of fuel is cheaper than a litre of some bottled waters.”
The motoring organisation claimed that diesel should have already been cut even more given current oil prices.
“Retailers still need to pass on more wholesale price savings on diesel to motorists at the pump, as the wholesale price is still 3p a litre cheaper than that of petrol,” Mr Williams said.
“We should really be seeing diesel priced several pence cheaper than petrol on every forecourt, to the point where the average price of diesel goes below that of petrol.”
And AA’s president Edmund King said: “Although oil at 30 dollars a barrel should be good news for UK drivers, AA research shows that it is barely enough to bring the UK price of petrol, outside areas influenced by supermarkets, below £1 a litre.
“This is partly because the pound has weakened against the dollar to the extent of adding 1p to the wholesale price of fuel. But this is nothing compared to the 20% boost to the profitability of petrol in commodity markets when matched against the price of oil. At present, commodity petrol is 12 times the value of oil – this time last year it was 10.
“This means that last January, the oil price needed to fall and stay below 38 dollars a barrel to drag the UK average price of petrol below £1 a litre. Now it needs to fall to below 30 dollars.”
He said the situation was “deja vu” for motoring clubs across Europe which had previously complained to the EU’s competition watchdog.
“Last December, the EU quietly dropped its investigation into oil and fuel pricing. However, it is now clear that UK motorists are once again left blind and hostage to prices that are out of whack with the general downturn in the commodity markets,” Mr King added.