Why UK drivers could miss out on £1 per litre fuel despite oil price crash

Wednesday, 22nd April 2020, 8:32 am
Updated Wednesday, 22nd April 2020, 8:32 am

Plummeting oil prices will not necessarily bring cheaper fuel for UK motorists, according to industry observers.

In an unprecedented crash over recent days, the wholesale value of oil has fallen to an 18-year low, with prices actually turning negative in the US as some traders are being paid to take oil off the hands of producers due to limited storage capacity.

The price of Brent crude, used as a benchmark for setting fuel prices has fallen below $20 a barrel for the first time since 2002, prompting calls for retailers to drop their forecourt prices to reflect the crash.

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Howard Cox of the FairFuelUK campaign group claimed that “dishonest” retailers were holding back on passing on savings and the average cost for petrol and diesel should be around 98p per litre and 106p per litre - around 10p per litre lower than their current levels.

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Why have oil prices dropped?

Fuel prices have already dropped by unprecedented amounts in the face of falling wholesale oil costs but Mr Cox accused retailers of failing to pass on the full savings even before the crash in oil prices.

He said: "Even with 70 per cent less fuel being sold, the dishonesty from these faceless businesses, using the coronavirus crisis as a smokescreen to maintain their profits, beggars belief.”

However, the RAC has warned that filling stations, especially smaller independent operators could struggle to stay in business if they drop their prices below £1 a litre.

RAC fuel spokesman Simon Williams said: “The oversupply of oil continues to suppress the barrel price and it’s clear now that plans by some of the world’s largest oil-producing nations to limit production haven’t yet been enough to lift the price – there’s currently too little demand for oil in the first place.

“It’s right that retailers charge a fair price for fuel that reflects the price of the raw product, and in theory petrol prices could fall below £1 per litre if the lower wholesale costs were reflected at the pumps – but at the same time people are driving very few miles so they’re selling vastly lower quantities of petrol and diesel at the moment. This means many will be at pains to trim their prices any further.

“We also continue to be concerned about smaller forecourts that provide a vital service in areas where the supermarkets don’t have a foothold as many are already finding conditions tough with sales having fallen off a cliff since lockdown. It would be bad news all round if these forecourts shut up shop for good.”

AA fuel spokesman Luke Boset said some key workers were suffering due to retailers' insistence on maintaining prices. He said: “The average pump price is higher because the retailers say they need to charge 10p a litre more to offset the lower volumes of fuel they are selling.

“That means that some drivers, such as NHS and other essential workers, are using their cars and being overcharged on average by more than a fiver a tank.

"I suspect that when the lockdown comes to an end, coronavirus is beaten and driving starts to return to normal, questions will be asked about the fairness of pump prices during the great oil crash of 2020."