The price of Brent crude has fallen below the $60 a barrel mark for the first time since early July 2009 and is predicted to keep on dropping after OPEC (Organisation of the Petroleum Exporting Countries) indicated it will not cut production even if oil hits $40 a barrel.
In July 2009 the average price of unleaded was 103.09p a litre and diesel 104.22p, due to the slightly stronger pound which affects pump prices as fuel is traded in dollars. While the pound is currently a little weaker than it was then at $1.57 there is a very good chance forecourt prices will continue to fall as the price of a barrel of crude goes lower which the RAC is hopeful will lead to petrol being sold nationally for under £1 a litre in the first few months of the new year.
RAC fuel spokesman Simon Williams said: “What’s currently happening at the pumps with falling fuel prices is something many company car drivers and fleet managers will not remember seeing before. Talk of prices going up like a rocket and falling like a feather could not be further from the truth as retailers have been quick to pass on savings at the forecourt since the RAC forecast on 6 December that prices were due to come down by 7p a litre for petrol and 6p for diesel.”
The RAC’s monitoring of fuel prices shows the average price of a litre of petrol is 116.9p (14 Dec 2014 – the latest available price) – 13.89p a litre cheaper than the start of the year when it was 130.79p – and diesel is 15.91p cheaper – 122.33p a litre now compared to 138.24p in January. On 15 December 2014 the average supermarket price of fuel was 114.26p for petrol and 120.18p for diesel.
Simon Williams added: “The cost of doing business this Christmas will be the cheapest it’s been for nearly five years, but the prospect of petrol going below £1 a litre in the new year is incredible, particularly when prices at the beginning of 2014 seemed to be heading ever upwards.
“Current forecasts are for average petrol prices to fall to below 110p a litre in the next fortnight and diesel to drop to under 116p. At these average prices across the country the cheapest retailers will almost certainly be selling petrol for around 105p a litre, or even lower.
“It is, however, important to realise that the oil and fuel market can always change due to a number factors, including the strength of the pound against the dollar and the global production of oil. If the current oversupply situation remains then it will clearly be good news for motorists and businesses that rely on the road network. With the United Arab Emirates energy minister saying OPEC will not cut production even if oil falls as low as $40 a barrel, we have every reason to think petrol at under £1 early in 2015 is a very real prospect.
“It’s also important to remember that while the cost of fuel itself has fallen, it only represents around a third of the overall pump price with the lion share being made up of fuel duty and VAT. At £1 a litre duty would be 57.95p and VAT 16.67p, leaving the cost of the oil and retailers’ margin at 25.38p.”
Motorists can keep abreast of fuel prices by visiting: www.rac.co.uk/advice/fuel-prices-explained